THE SUPREME COURT'S RULING ON FRAUDULENT TITLES IN KENYA

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Now onto today’s topic;

The case of

Harcharan Singh Sehmi & another v Tarabana Company Limited & 5 others is a landmark Supreme Court decision that has reshaped the country's land laws, particularly regarding fraudulent titles. The ruling reinforces that a land title is not indefeasible if its foundation is illegal or irregular, and it establishes a higher standard of due diligence for prospective buyers. 

FACTS OF THE CASE 

The case centered on a long-term lease for property L.R. No. 209/2759/9. The appellants, who included Harcharan Singh Sehmi, were registered as tenants in common of this property. Their 59-year lease began in 1942 and was scheduled to expire in 2001. Crucially, before the lease expired, they applied to the relevant authorities for an extension. Both the Director of City Planning and the Director of Survey recommended that the extension be approved without conditions. 

However, the 1st and 2nd respondents claimed the lease had simply expired, meaning the property reverted to the Government of Kenya, and was then allocated to the 2nd respondent in 2010 under a separate title. Because of this separate title, the appellants were forcefully kicked out in October 2014. The core problem was that the appellants believed they had done enough to keep the land, but the respondents claimed ownership through a new government allocation. 

LEGAL ISSUES 

1. The Innocent Buyer Rule: What exactly does the doctrine of Bona fide/Innocent Purchaser for Value without Notice mean, and when does it apply? This rule essentially asks: if I buy something (a property) and I genuinely didn't know there were problems with the title, am I protected?
2.  Protection for Bad Titles: Can that innocent purchaser rule protect someone who buys land that was originally public land and was allocated to the seller illegally or irregularly in the first place?
3. The Expectation Rule: When a long-term leaseholder applies to renew their lease on public land, do they have a legitimate expectation that it will be renewed, or at least that their application will be fairly considered? 

PROCEDURAL HISTORY AT THE COURTS 

1. AT ELC (TRIAL COURT) 

The Environment and Land Court sided with the appellants. It found that because the appellants started the renewal process before the lease ended, they had a legitimate expectation that their lease would be extended. More importantly, the ELC ruled that the allocation of the property to the 2nd respondent was illegal because the procedures required under the Government Lands Act (now repealed) were not followed.

2. AT THE COURT OF APPEAL 

The Court of Appeal disagreed and overturned the ELC’s decision. They focused solely on the 1st respondent, arguing that they were a bona fide purchaser for value without notice (an innocent buyer). The COA held that even though the appellants applied for renewal, there was no proof the lease was actually extended. Therefore, the 1st respondent’s title was protected under the Land Registration Act, regardless of how the land was initially acquired by the 2nd respondent.

SUPREME COURT'S HOLDING 

The Supreme Court allowed the appeal by the appellants, completely rejecting the Court of Appeal's reasoning. The Court issued several final, highly impactful orders:

• The Court of Appeal’s judgment was overturned.
• The Chief Land Registrar was directed to cancel the 1st respondent’s title from the land register.
• The appellants were directed to be registered as the rightful proprietors of the suit property.
• The 1st respondent was given six months to remove and demolish all structures and developments they had erected on the property. 

THE SUPREME COURT'S JUDGEMENT 

The Supreme Court’s reasoning provided key clarity on land ownership, especially concerning titles derived from irregular allocations of public land:

1. Defining the Innocent Purchaser: The Court clarified that the doctrine of bona fide purchaser requires three elements: innocence (acting in good faith), purchase for value (paying consideration), and acquiring a legal estate. The doctrine of innocent purchaser applies when you buy land without knowing about an equitable interest (like someone else having a claim or a pending application on the land). Crucially, the Supreme Court stated that being an innocent purchaser does not excuse or protect you from the inherent illegality or irregularity of the title itself.
2. Illegal Titles are Void: The Court established that the doctrine of innocent purchaser cannot protect a purchaser of an illegally or irregularly allocated title to public land. In this case, the 2nd respondent was incapable of passing a valid title to the 1st respondent because the initial allotment of the land to the 2nd respondent was illegal. This illegality stemmed from two facts: the allotment was made by a person other than the Commissioner of Lands, and the requisite procedural steps were not followed.
3. Affirming Legitimate Expectation: The Court confirmed that an application for renewal, if it is clear, unambiguous, and addressed to an authority competent to renew the lease, ignites the legitimate expectation. Since the appellants made their application for renewal three months before the lease expired, they had a legitimate expectation that their lease would be extended, especially since the competent authority had previously exercised the power to extend leases for similarly situated applicants. 

LEGAL PRINCIPLES ESTABLISHED 

The Supreme Court established or reinforced several vital legal principles concerning land governance and ownership:

1. Limits of Bona Fide Purchaser Protection: The protection offered by the doctrine of bona fide purchaser for value without notice extends only to claims involving equitable interests, but it does not serve as a shield against fundamental illegality or irregularity of the title itself.
2. Voidance of Illegally Allocated Public Land Titles: A title derived from the illegal or irregular allocation of public land is void ab initio (void from the beginning), and the doctrine of innocent purchaser for value without notice cannot validate such a title. Specifically, allocation made without adhering to prescribed procedures or by an unauthorized individual (other than the Commissioner of Lands) renders the ensuing title invalid.
3. Activation of Legitimate Expectation: An applicant seeking renewal of a lease over public land ignites a legitimate expectation by submitting a clear and unambiguous application to a competent authority prior to the lease expiry. This requires the authority to fairly consider the application and provide reasons should it be declined. 

In conclusion, The Sehmi case is a watershed moment in Kenya's land law jurisprudence. It serves as a stark warning to both buyers and lenders that superficial due diligence is inadequate. The burden is now heavily on the purchaser to ensure a title's legitimacy from its origin. 

Catch you in the next blog!

 

Disclaimer- The information provided is for general informational purposes only and should not be considered as professional advice. Please consult a qualified professional for specific guidance. 

REFERENCES 

Supreme Court of Kenya. (2024). Harcharan Singh Sehmi & Another v Tarabana Co. Ltd & 5 Others (Petition No. E033 of 2023) [Media summary / ruling].