Wanganga v Black Spider Auto Tech Ltd & another (Environment and Land Case 17 of 2022) [2026] KEELC 4608 (KLR) (2 July 2026) (Judgment)

**REPUBLIC OF KENYA** **IN THE ENVIRONMENT & LAND COURT AT NAIROBI** **ELC NO. 17 OF 2022** **EMILY WANJIKU WANGANGA - PLAINTIFF** **VS** **BLACK SPIDER AUTO TECH LTD - DEFENDANT** **RAFIKI MICRO FINANCE** **BANK LIMITED - INTERESTED PARTY** **JUDGEMENT** 1. Vide an amended plaint dated 7/9/2022, the Plaintiff filed suit against the Defendants and sought the following orders; 1. Special damages in the sum of Kshs 17,730,000/- 2. Interest on the balance of the Purchase price in the sum of Kshs 17,730,000/- at the Court rate from the date the full purchase price was due and payable by the 27/10/21 until payment in full 3. Forfeiture of 10% of the purchase price in the sum of Kshs 2.0 Million paid by the Defendant on account of liquidated damages for breach of contract. 4. In the alternative, a declaration that the transfer of title of the suit property referred to as Number 8226/122 [suit land] to the Defendant and subsequent charge thereto by the Defendant to Rafiki Microfinance Bank Limited for the sum of Kshs 18,300,000/- was fraudulent 5. An order for the rescission of the sale agreement dated 30/4/2021 and cancellation of the charge over the suit property dated 31/3/2022 and the transfer to the Defendant of the title to the suit land with orders that the title to revert to the Plaintiff. 6. Costs of the suit 2. It is asserted that the Plaintiff and the Defendant entered into a sale agreement for the sale and purchase of the suit land at a price of Kshs 20 Million. A 10% deposit was paid upon execution of the agreement, and the remaining balance was due within 180 days, specifically by 27/10/21, with time being of the essence. In accordance with the terms of the sale agreement, the Plaintiff transferred the suit land to the Defendant to facilitate the Defendant's acquisition of a loan to finance the purchase of the suit land. 3. That, in breach of the aforementioned sale agreement, the Defendant transferred the suit land into its name and charged the property to the interested party on 31/3/2022 to secure the sum of Kshs 18,300,000/-. The Defendant failed to remit the remaining balance of the purchase price to the Plaintiff. As at the date of filing the suit, the Plaintiff had received Kshs 2,270,000/-, leaving an outstanding balance of Kshs 17,730,000/-. 4. It was alleged that the transfer of the suit land to the Defendant's name and subsequent dealings constituted fraudulent conduct on the part of the Defendant. Particulars of the fraud were stated under paragraph 7 of the amended plaint. Despite the issuance of a demand and notice to rescind the sale agreement, the Defendant has failed to pay the remaining balance of the purchase price or to return the original title deed for the suit land to the Plaintiff, it is averred. 5. The Defendant denied the Plaintiff's claims and sought strict proof thereof. It denied any fraud or breach of the sale agreement, specifically referencing paragraphs 5, 6, 7, 8, and 9 of the amended plaint. Nonetheless, it acknowledged that the parties entered into the sale agreement dated 21/5/21. Upon taking possession of the property, it spent approximately Kshs 14 Million on improvements. The Plaintiff frustrated the procurement of the loan facility, which was intended solely to settle the Plaintiff's remaining balance of the purchase price in accordance with the terms and conditions of the sale agreement. As a result, the interested party revoked the loan an declined to disburse the same. In conclusion, the Defendant contended that the suit discloses no cause of action against it, being frivolous and vexatious, and therefore warrants dismissal. 6. The interested party asserted that it was unfamiliar with the Plaintiff's claim and urged the Plaintiff to provide strict proof. It denied any involvement in fraudulent activities, in the illegal registration of the title, or in the charge. It stated that the Defendant was the duly registered proprietor of the land in question and, via a letter dated 9/3/2022, had successfully obtained a loan of Kshs 18,300,000/-. This comprised a Kshs 15 Million Msingi Dabhiti for working capital and a Kshs 3.3 Million development loan intended to complete the construction of the Defendant’s head office at Ngara and to establish a branch at Chuka. The Defendant executed a charge dated 28/3/2022, registered on 31/3/2022, over the suit land in favour of the interested party as security for the loan of Kshs 18.3 Million. The charge was recorded on the title as entry No. 5 on 31/3/2022; hence, the interested party acquired a legal interest in the suit land as an innocent chargee for value. On 18/7/2022, it obtained the leave of the Court to register its security at the Companies Registry and was successfully registered on 25/7/2022, in addition to a guarantee from Margaret Wanjiru Ndungu, a director of the Defendant, as further security for the facility advanced. It contended that, having carried out due diligence prior to advancing the loan, its charge cannot be impeached based on claims presented by the Plaintiff. That if the title and its charge are annulled, it shall suffer irreparable loss and prejudice. Finally, that its interest in the property was registered in a regular, procedural, and legal manner. Further, that in the event of any irregularity, the recourse would be to order compensation as sought by the Plaintiff in her plaint and that the compensation should be directed to the Defendant and not the interested party, who was not party to any irregular or fraudulent scheme against the Plaintiff. **The evidence of the parties** 1. Emily Wanjiku Wanganga testified as PW1 and relied on her witness statement dated 5/8/22, 7/9/22 and the supplementary statement of 5/2/24 in evidence in chief and produced documents contained on pages 12-44; 54-55 and 72 -82 of the Plaintiffs' trial bundle, all in support of her case. 2. In summary, the witness reiterated the contents of the Plaint and added that she transferred the property to the Defendant in accordance with the terms of the sale agreement, solely to enable the Defendant to obtain a loan to pay the remaining balance of the purchase price. To her surprise, she discovered that her legal representatives had released the title to the Defendant without any professional undertaking to secure payment of the remaining balance in her favour. She confirmed receipt of Kshs 3.070 Million from the Defendant, leaving a balance of Kshs 16.930 Million. When Kshs 2 Million is added as damages for breach of contract, the total amount increases to Kshs 18.930 Million. The witness further stated that the Defendant had fraudulently charged the title to her detriment and loss, and that, despite demands for settlement, the outstanding balance remains unpaid. Additionally, she stated that on 26/7/22, she wrote a letter to the interested party, notifying it of the fraudulent transfer and charge of the suit land without payment of the purchase price, which compelled the interested party to revoke the loan on the grounds of fraud and illegality. The witness also refuted any developments allegedly carried out by the Defendant on the suit land. 3. In cross-examination, she stated that she sold the land to the Defendant for Kshs 20 Million and received a 10% deposit. A term of the agreement was that the title would be surrendered to the vendor to secure a loan for payment of the balance of the purchase price. Vacant possession was granted to the purchaser. She handed over all the completion documents to her lawyer, including the original title. She stated that, according to the letter of offer, the Defendant was to borrow Kshs 18.3 Million, equivalent to the balance of the purchase price owed to her. She initiated the process of loan revocation by her letter dated 26/7/22. She stated that, according to the documents on record, third parties received monies from the Defendant, but she did not know why they were being paid. She refuted receiving the sum of Kshs 10 Million from the Defendant. Since the interested party revoked the loan, she has no claim against it because it did not disburse the loan at all. When shown the letter of offer and the charge, she stated that the documents disclose the purpose of the loan as working capital and completion of the Defendant's head office, and no provision was made for the payment of the purchase price, contrary to the terms and conditions of the sale agreement. 4. PW2 – Mr. David Thiongo Kariuki testified and relied upon his witness statement dated 5 February 2024 and his affidavit sworn on 10 March 2024 to substantiate his primary evidence. He stated that he is a land broker who facilitated the introduction of the Plaintiff to the Defendant. Although no agency agreement was executed between him and the Defendant, he typically charges a 3% commission on the purchase price. Additionally, he manages a construction enterprise and was engaged by the Defendant to construct a perimeter wall around the suit land, pursuant to a contract dated 13/07/2021, for a fee of Kshs 2.75 Million. He completed approximately 20% of the work before abandoning the site owing to the non-payment by the Defendant. Apart from a sum of Kshs 100,000/- for the work performed, the Defendant did not pay any further payments, as most of the cheques issued in his name by the Defendant either bounced or were cancelled prior to encashment. He further avowed that the land transaction/purchase was not finalised. 5. DW1 – David Njuguna Ngoi testified as DW1 and relied on his witness statement dated 25/7/23, and stated that he holds the position of director of the Defendant company. He also submitted supporting documents for the Defendant’s defence, marked as DEX Nos 1-9. He indicated that the Defendant and the Plaintiff entered into a sale agreement regarding the suit land for a total consideration of Kshs 20 Million; from this amount, he paid the Plaintiff a deposit of Kshs 2 Million. The remaining balance was to be obtained through a loan from the interested party. The land was subsequently transferred to the Defendant’s name and charged in favour of the interested party for the sum of Kshs 18.3 Million. He stated that, following a letter from the Plaintiff addressed to the interested party dated 26/7/22, the loan was not disbursed. The Plaintiff alleged that the transfer and the charge were fraudulent, an allegation that alarmed the interested party, who developed cold feet and refused to disburse the funds. He further clarified that the Plaintiff willingly handed over the completion documents through her advocates. 6. He stated that the Plaintiff has received a total payment of Kshs 10 Million, leaving an outstanding balance of Kshs 10 Million and that the claimed amount of Kshs 17.3 Million was incorrect. He blamed the transaction's collapse on the Plaintiff. However, he acknowledged that the payment of the remaining purchase price balance was not disclosed in the loan offer letter. While he claimed to have disputed the loan's revocation, he was unable to provide supporting evidence to the Court. He further stated that he presented the transfer documents before the Court. To date, the Plaintiff has not been paid the remaining balance of the purchase price, despite the Defendant's claim to have the necessary funds for settlement. Furthermore, the facility was revoked by the interested party on 4/9/22. While the title remains charged to the interested party, even though the loan has not been disbursed. 7. DW2 – Robert Kirui relied on his witness statement dated 20/1/2026 and produced documents marked as DEX Nos 1-10. He stated that the purpose of the loan taken by the Defendant was indicated as working capital and the completion of its head office, and not to pay the balance of the purchase price owed to the Plaintiff. The charge was finally registered on 25/7/22. The Plaintiff challenged the loan in writing, leading the bank to revoke it. That the Defendant did not contest the revocation of the said loan, and finally the loan was never disbursed. He was categorical that the interested party has no objection to the discharge of the charge, but at the Plaintiff's cost. 8. That the Defendant did not disclose the sale agreement, nor that the purpose of the loan was to pay the purchase price. This non-disclosure compelled the bank to revoke the loan. **The written submissions** 1. At the close of the hearing, the parties elected to file written submissions. I have read and considered the submissions and the legal cases cited therein, and wish to thank Counsel for their industry and insight. **Analysis and determination** 1. Having considered the pleadings, the evidence adduced at the hearing and the written submissions of the parties, the Court is of the view that the key issues for determination are; 1. Whether the Plaintiff's title was transferred to the Defendant and charged to the interested party in a fraudulent and illegal manner, and if in the affirmative, what orders should the Court issue? 2. Whether the Defendant was in breach of the sale agreement dated 30/4/2021 3. Whether the Plaintiff is entitled to the reliefs sought 4. Costs of the suit. 2. It is undisputed that the Plaintiff and the Defendant entered into a sale agreement on 30 April 2021. It was a term of the sale agreement the purchase price was t Kshs 20 Million. A deposit of 10% of the purchase price, amounting to Kshs 2 Million, was payable as follows; Kshs 1 Million upon the signing of the agreement and the remaining balance upon confirmation of the due diligence on the subject land through a title search at the Lands Office. Moreover, it was agreed that the remaining amount of the purchase price, being Kshs 18 million, was payable within 180 days from the date of confirmation of the search, which marked the completion date. The completion date was consequently scheduled for 30 April 2021. The Vendor was to provide vacant possession to the Purchaser upon payment of the 10% deposit. Additional terms included that the Vendor was to release the original title deed and transfer the land to the Purchaser to facilitate the Purchaser to obtain a loan from a bank to settle the outstanding balance of the purchase price. The agreement explicitly stated that time was of the essence. Upon acknowledgement of payment of the 10% deposit, the Vendor's advocate was to release the original title deed in exchange for a suitable professional undertaking by the Purchaser's advocate to the Vendor's advocate and to agree to a transfer in order to facilitate the acquisition of a loan to settle the balance of the purchase price. **Whether the Plaintiff's title was transferred to the Defendant and charged to the interested party in a fraudulent and illegal manner, and if in the affirmative, what orders should the Court issue?** 1. The Plaintiff has pleaded fraud on the part of the Defendant in the manner in which the title was transferred and charged with the intention of depriving her of her rights and interest. This claim has been emphatically denied by the Plaintiff and the interested party. 2. It is trite law that whoever lays a claim before the Court against another has the burden to prove it. Sections 107 and 108 of the Evidence Act provide as follows: 107 “(1)Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.(2)When a person is bound to prove the existence of any fact it is said that the burden of proof lies on that person. 108. The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.” 1. It is now settled law that fraud is a serious accusation which procedurally has to be pleaded and proved to a standard above a balance of probabilities but not beyond reasonable doubt. At page 427 in **Bullen & Leake & Jacobs, Precedent of pleadings 13th Edition** quoting with approval the cases of **Wallingford v Mutual Society (1880) 5 App. Cas.685 at 697, 701, 709, Garden Neptune V Occident [1989] 1 Lloyd’s Rep. 305, 308, Lawrence V Lord Norreys (1880) 15 App. Cas. 210 at 221 and Davy V Garrett (1878) 7 ch.D. 473 at 489** it is stated that: - “Where fraud is intended to be charged, there must be a clear and distinct allegation of fraud upon the pleadings, and though it is not necessary that the word fraud should be used, the facts must be so stated as to show distinctly that fraud is charged. The statement of claim must contain precise and full allegations of facts and circumstances leading to the reasonable inference that the fraud was the cause of the loss complained of (see). It is not allowable to leave fraud to be inferred from the facts pleaded and accordingly, fraudulent conduct must be distinctly alleged and as distinctly proved (|). “General allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any Court ought to take notice”. 1. As regards standard of proof in respect to a charge of fraud, the law is quite clear. In R.G. Patel v. Lalji Makanji(1957) EA 314 the former Court of Appeal for Eastern Africa stated thus: “Allegations of fraud must be strictly proved; although the standard of proof may not be so heavy as to require proof beyond reasonable doubt, something more than a mere balance of probabilities is required.” 1. In the case of Vijay Morjaria vs Nansingh Madhusingh Darbar & Another[2000]eKLR, Tunoi, JA. (as he then was) stated as follows: “It is well established that fraud must be specifically pleaded and that particulars of the fraud alleged must be stated on the face of the pleading. The acts alleged to be fraudulent must, of course, be set out, and then it should be stated that these acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and distinctly proved, and it is not allowable to leave fraud to be inferred from the facts.” 1. Section 26 of the Land Registration Act provides two instances where a title can be challenged. The first is on the ground of fraud and/or misrepresentation to which the person is proved to be privity to and/or a party and secondly where the certificate of title has been acquired illegally, unprocedurally or through a corrupt scheme. 2. The Plaintiffs assert that the title was transferred to the Defendants' legal representative in breach of the terms of the sale agreement, which required the exchange of appropriate professional undertakings to secure payment of the remaining purchase price. Clause 6 of the agreement provided that the Plaintiff would release the original title in exchange for a suitable professional undertaking from the Defendants' attorneys. The Plaintiff accused her legal counsel of collusion and professional negligence, prompting her to file a criminal complaint against them. The Court found that Ogessa & Company Advocates, acting for the Defendant, gave a professional undertaking in their letter dated 20/5/2021, undertaking to pay the sum of Kshs 18 Million within 6 months of the successful registration of the transfer in favour of the purchaser. Nothing therefore turns on this ground. It is rejected. 3. It is acknowledged that the sale agreement contemplated the transfer of the suit land to the Vendor/Defendant and included a charge securing a loan facility intended to settle the remaining balance of the purchase price payable to the Plaintiff. The agreement stipulated that the Plaintiff was to release the original title deed upon receipt of the outstanding purchase amount of Kshs 2 Million. However, the evidence before the Court indicates that the title was released before the Plaintiff received the full payment. Furthermore, the title was transferred into the Defendant's name on 19/7/2021, before the final deposit payment on 4/8/2021, thereby contravening the explicit terms of the sale agreement. It could be contended that, having accepted the funds, albeit beyond the agreed timeline, the Plaintiff cannot subsequently renege or alter their position. Nevertheless, its significance will become clearer in the subsequent discussion. 4. The Plaintiff consented to transfer the title to the Defendant, who would then use it as collateral to secure the outstanding purchase price of Kshs 18 Million in favour of the Plaintiff. The Defendant informed the Court that it sought a loan facility from the Interested party in the amount of Kshs 18.3 Million. However, a meticulous review of the letter of offer dated 9/3/2022 and the charge dated 28/3/2022 reveals that the purpose of the loan was designated for working capital [Kshs 15 Million], the completion of the head office construction at Ngara, and the opening of the Chuka branch. There was no indication of any intention to pay the remaining balance of the purchase price to the Plaintiff. Had the loan been disbursed, the Plaintiff would not have benefited from it, which contradicts the terms of the sale agreement and the mutual understanding established at the contracting stage. The witness from the Interested party stated to the Court that it was unaware of the parties' agreement, specifically regarding the purpose of the loan. The Court finds that the Defendant deliberately concealed material facts from the Interested party. This conduct is fraudulent and constitutes deception by the Defendant. The Defendant's motive was to secure funds by using the Plaintiff's title for personal gain, thereby leaving the Plaintiff at a disadvantage. Under the circumstances, the Plaintiff would not have received any payment. It was her vigilance that prevented further harm when she lodged a complaint with the Interested party on 26/7/22, alerting them to the suspicious transaction. In response, the Interested party promptly revoked the loan on 4/9/2022. It is noteworthy that, to date, the Defendant has neither challenged the loan revocation nor settled the outstanding purchase price. Although the Defendant blamed the Plaintiff for obstructing the disbursement of the loan, it remains clear that she would have lost the land without payment. The Court concludes that the Plaintiff has established fraud by the Defendant. The Interested party categorically informed the Court that it will not challenge the cancellation of the charge and the release of the original title to the Plaintiff, now that it has not disbursed any funds to the Defendant. 5. Guided by the provisions of Section 80 of the Land Registration Act, the Court concludes that the Defendant actively participated in the fraudulent conduct and shall not be permitted to derive benefit from such fraudulent misconduct. The Court holds that this case warrants the annulment of the registration of the title in the Defendant's name, as well as the charge in favor of the interested party. Final relief orders will be issued accordingly. **Whether the Defendant was in breach of the sale agreement dated 30/4/2021** 1. The Court has previously determined that the Defendant's actions in transferring and registering the suit land in its name, as well as in establishing a charge thereon in its favor, constitute fraudulent conduct. It is therefore unequivocally clear that the Defendant, in attempting to procure funds from the interested party for its own benefit, contrary to the terms of the agreement, and without remitting the remaining balance of the purchase price to the Plaintiff, while intentionally withholding material facts, committed a breach of the sale agreement. 2. Clause 10 of the agreement of sale provided as follows; “Failure to honor the terms as set out in this agreement by either party will attract a penalty or 10% of the total purchase price to the aggrieved party: 1. If the Vendor fails to honor her word after receiving the deposit and the Purchaser finds out that the property is encumbered, she shall pay a penalty of 10% of the Total Purchase Price together with a full refund on the 10% deposit made by the purchaser. 2. If the Purchaser fails to honour his part of the agreement, he shall be liable to pay a 10% penalty on the total price to the Vendor and vacate the property with immediate effect. 3. If for any other cause whatsoever the transaction shall not be completed on the Completion date as a result of any breach by either of the parties, the party not in breach, being ready able and willing to complete within twenty-one (21) days from the date upon which such notice is served. If the party in breach shall fail to complete before the expiry of the said notice period, then the party not in breach shall be entitled at his discretion either: 4. to extend the time for completion; or 5. to immediately rescind this Agreement by notice in writing in that behalf to the party in breach. Provided always that if this Agreement shall be so rescinded by; The Vendor, an amount equal to ten (10%) of the Purchase Price shall be forfeited to the Vendor and the remaining sums paid by the purchaser immediately. 1. In the present case, the Plaintiff issued a notice of rescission on December 7, 2022, which the Defendant entirely disregarded, as demonstrated by DW1, who informed the Court that the Defendant had failed to respond to the notice of rescission. At this juncture, the Plaintiff had fulfilled her obligation under the agreement by surrendering the completion documents to the Defendant. Pursuant to clause 10(b) of the sale agreement, the Court concludes that the Defendant is in breach and is liable to pay a penalty of 10% of the total purchase price, amounting to Kshs 2 Million, to the Plaintiff, and to vacate the suit land with immediate effect. The relevant reliefs will be issued shortly. 2. On the issue concerns the total amount paid to the Plaintiff during the transaction, the Defendant contended that the Plaintiff received Kshs 8 Million, and in some instances Kshs 14 Million, either directly or through third parties. This assertion is inconsistent. PW2 testified that he was contracted by the Defendant to fence the property at a cost of Kshs 2.75 Million. A construction agreement dated 13/7/21, presented by the Defendant and acknowledged by PW2, was referred to. He also testified that he was paid only Kshs 100,000/- for the works, which he abandoned at 20% completion due to non-payment by the Defendant. Unchallenged evidence showed that the cheques drawn in his name were intended for his fees; however, they were dishonoured and remain unpaid. The Defendant failed to produce evidence, such as a bank statement, to substantiate that the funds it claims to have paid were, in fact, disbursed to either the Plaintiff or PW2. Based on the most compelling evidence supplied by the Plaintiff regarding the sums paid to the Plaintiff, the Court hereby determines that the amounts received by the Plaintiff amount to Kshs 3,070,000/- and no more. The Defendant also argued that it carried out improvements to the property valued at Kshs 14 Million. However, this claim falls away in the absence of cogent evidence in its support. **Whether Plaintiff is entitled to the reliefs sought** 1. Having established the Defendant's involvement in fraud and determined that the Defendant breached the sales agreement, the logical conclusion is that the Plaintiff has substantiated her case and is consequently entitled to the reliefs sought. To avoid unjust enrichment on the part of the Plaintiff, I order the Plaintiff to refund the sum of Kshs 1,070,000/- received in excess of the agreed deposit. 2. The Plaintiff having succeeded in her claim, I see no reason to deny her costs. 3. **Final orders for disposal** 1. It is hereby declared that the transfer of title of the suit property referred to as Number 8226/122 [ suit land] to the Defendant and subsequent charge thereto by the Defendant to Rafiki Microfinance Bank Limited for the sum of Kshs 18,300,000/- was fraudulent null and void 2. It is hereby declared that the Defendant breached the sale agreement dated 30/4/2021 3. The Land Registrar be and is hereby ordered to forthwith cancel entry Nos 4 and 5 on the title and revert the suit land to the Plaintiff. 4. The Defendant breached the sale agreement and is therefore liable to pay a penalty being the forfeiture of 10% of the purchase price in the sum of Kshs 2.0 Million [liquidated damages]. 5. In accordance with para 10 (b) of the sale agreement, the Defendant is hereby ordered to vacate the suit land forthwith and hand over possession to the Plaintiff; in default, eviction to ensue forthwith. 6. The Plaintiff is ordered to refund the sum of Kshs 1,070,000/- to the Defendant sixty (60) days after the full compliance of all the orders above. 7. Costs shall be paid by the Defendant in favour of the Plaintiff and the interested party. 4. Orders accordingly **DELIVERED, DATED AND SIGNED AT NAIROBI THIS 2ND DAY OF JULY 2026 VIA MICROSOFT TEAMS.** **J. G. KEMEI** **JUDGE** **Delivered Online in the presence of:** 1. Ms. Chege for the Plaintiff 2. Mr. Githinji for the Defendant 3. Mr. Olunga for Interested Party 4. CA- Ms Kendi