On 21st April 2023, the Supreme Court delivered its Judgment in Dina Management Limited v County Government of Mombasa & 5

Others (2022) KESC 24 (KLR) wherein it dismissed the Appellant’s Petition of Appeal. The decision sent seismic shock waves across the Kenyan legal terrain the reverberations of which arguably upended an entire system of land law. The history of the case dates back to September 2017, when it is claimed by the Appellant (Dina Management Limited) that the 1st Respondent (the County Government of Mombasa), without prior notice, forcefully entered the property known as MN/1/6053 situated in Nyali Beach, Mombasa County (the Suit Property), which was registered to the Appellant, and demolished the entire perimeter wall facing the beachfront and also proceeded to flatten the developments on the suit property.

Prior to filing of the Petition of Appeal, the Appellant and the 1^st Respondent had filed Petitions before the Environment and Land Court (the ELC), which were consolidated to be heard as one (1) case. Among the issues for determination before the ELC was whether the Appellant should suffer the faults (if any) of the third parties in the matter. On this issue, the ELC found that the Appellant could not be protected as a bonafide purchaser without notice as it failed to demonstrate that it had conducted due diligence before purchasing the Suit Property.

Aggrieved by the decision of the ELC, the Appellant moved the Court of Appeal, which, in delivering its Judgment on the issue, agreed with the ELC that the Appellant cannot enjoy protection under the doctrine of the bonafide purchaser. The Court of Appeal’s rationale was that because the Suit Property was originally acquired unlawfully, the title in the property could not qualify for indefeasibility. It is against this background that the Appellant filed the present Petition of Appeal in the Supreme Court.

The Supreme Court’s determination

In its Judgment, the Supreme Court indicated that to establish whether the Appellant is a bonafide purchaser, there was need to go to the root of the title, right from the first allotment.

It was not in contention that the Suit Property was first allocated to the former President, H. E. Daniel arap Moi, in 1989, and that the applicable law at the time relating to physical planning was the Land Planning Act (Cap. 303) Laws of Kenya, which was later repealed by Physical Planning Act (Cap. 286) Laws of Kenya, which has since been repealed by the Physical and Land Use Planning Act, No. 13 of 2019.

Under the Development and Use of Land (Planning) Regulations, 1961 made under the Land Planning Act, public open spaces were classified as land designated for public purposes. At the time, the Suit Property was designated as an open space. It is on this premise that the Supreme Court held that the Suit Property was a public utility and could not be described as unalienated land that was available for allotment as urged by the Appellant.

Nonetheless, the Supreme Court, in giving the Appellant the benefit of the doubt, discussed the procedure for allocating unalienated land. In its analysis, the Supreme Court pointed out that a Letter of Allotment, being one of the primary documents used in the allocation of land, should be accompanied by a Part Development Plan, which document was not produced in Court as evidence of the allocation of the Suit Property to the seller. As such, the Supreme Court found that the said allocation would have been irregular in any event.

Consequently, it was held that because the first allocation of the Suit Property had been irregularly obtained, there was no valid legal interest which could pass to the seller, who in turn could pass to the Appellant. The Supreme Court’s rationale was that the Appellant ought to have been more cautious in undertaking its due diligence, when purchasing the Suit Property.

While the Petition of Appeal raised various issues for determination, the crux of this article is the Supreme Court’s interpretation of the doctrine of the bonafide purchaser in light of the Curtain Principle.

The Curtain Principle

The Curtain Principle is one of the foundational principles of the Torrens system of registration of land. The Torrens system, which finds its roots in Australia, is a system of land registration under which the Certificate of Title is sufficient evidence of good title. There are three (3) principles underpinning this system, that is: the Mirror Principle, the Curtain Principle, and the Insurance Principle. More specifically, the Curtain Principle stipulates that there is no need to look beyond the register, as the Certificate of Title contains all information about the title. In essence, a purchaser need not make inquiries or search previous titles as the current Certificate of Title serves as proof of ownership.

The Curtain Principle is enshrined under section 26 of the Land Registration Act, No. 3 of 2012 (the LRA) under which a Certificate of Title issued by the Registrar is deemed to be conclusive evidence of ownership of land. However, the Supreme Court, in its Judgment, departed from the Curtain Principle on the basis that for a purchaser to seek refuge behind it, he must demonstrate that he is a bonafide purchaser, and should be able to go to the root of the title which he holds.

The Doctrine of the Bonafide Purchaser

The Curtain Principle may be interpreted alongside the doctrine of the bonafide purchaser as the two are both founded on the same rationale. Black’s Law Dictionary (8th Edition) at page 1271 defines a bonafide purchaser as follows:

“One who buys something for value without notice of another’s claim to the property and without actual or constructive notice of any defects in or infirmities, claims, or equities against the seller’s title; one who has in good faith paid valuable consideration for property without notice of prior adverse claims. Generally, a bonafide purchaser for value is not affected by the transferor’s fraud against a third party and has a superior right to the transferred property…”

Until recently, the Courts took the position that purchasers could seek refuge under section 26 of the LRA. The rationale behind this is that the responsibility to ensure the accuracy of the register and the authenticity of titles lies with the Government, and not individuals, which is by law required to pay compensation for any fraud or other errors committed during registration.

The Court of Appeal in Tarabana Company Limited v Sehmi & 7 Others (2021) KECA 76 (KLR) aligned itself with this position in stating that:

“With due respect to the learned trial Judge, the means of determining whether the Appellant’s title was indefeasible and not subject to challenge is spelt out under section 26 of the LRA. What was required was to determine whether the Appellant was in any way involved in the process through which the 4th Respondent obtained title, which the learned Judge found was irregular and with which we agree. There was no evidence adduced before the trial court to show that the Appellant played any role, or was involved in any way in the said process. If title was acquired by fraud, or misrepresentation, illegal, unprocedural or corrupt scheme, the same was before the Appellant came into the picture. We therefore find that the appellant was a bonafide innocent purchaser for value for these reasons, and its title could not and cannot be challenged.”

However, the foregoing is tempered by an alternative school of thought, which is what was followed by the Supreme Court. Under this school of thought, it is posited that the doctrine of the bonafide purchaser should not allow a purchaser free rein to throw caution to the wind, and a purchaser is required to undertake sufficient due diligence at all stages, including satisfying himself on the propriety of the origin and history of the title. In this regard, the Court of Appeal

in the case of Arthi Highway Developers Limited v West End Butchery Limited & 6 Others (2015) eKLR was succinct in stating that:

“For a purchaser who claims that due diligence was carried out at all stages, we find it difficult to believe that there was no explanation sought from the Registrar of Titles about the mysterious disappearance of the original Deed file from the strong room of the land registry. It was common knowledge, and well documented at the time, that the land market in Kenya was a minefield and only a foolhardy investor would purchase land with the alacrity of a potato dealer in Wakulima market.”

In reiterating this position, the Supreme Court in its Judgment pronounced itself as follows:

“…where the registered proprietor’s root title is under challenge, it is not enough to dangle the instrument of title as proof of ownership. It is the instrument that is in challenge and therefore the registered proprietor must go beyond the instrument and prove the legality of the title and show that the acquisition was legal, formal and free from any encumbrance including interests which would not be noted in the register.”

Conclusion

The Judgment of the Supreme Court in Dina Management Limited v County Government of Mombasa & 5 Others is a clear departure from the Curtain Principle that underpins the Torrens system. In essence, it is the Supreme Court’s position that a purchaser cannot claim to be a bonafide purchaser if he cannot go to the root of the title and, in effect, cannot seek refuge under the Curtain Principle. It is therefore advisable for a purchaser to investigate all titles preceding the current one, and it is no longer enough to rely on a Certificate of Title as conclusive proof of ownership.

The Supreme Court’s Judgment, in our view, is a double-edged sword. While it may discourage fraud in land transactions, which is a growing menace, departing from the Curtain Principle may prove to be problematic in the sense that it defeats the purpose of section 26 of the LRA, and altogether discourage the buying and selling of land in this country.