Case Law

Shah & 7 others v Mombasa Bricks & Tiles Limited & 5 others (Petition 18
(E020) of 2022) [2023] KESC 106 (KLR) (28 December 2023) (Judgment)
Neutral citation: [2023] KESC 106 (KLR)
REPUBLIC OF KENYA
IN THE SUPREME COURT OF KENYA
PETITION 18 (E020) OF 2022
PM MWILU, DCJ & V-P, SC WANJALA, NS NDUNGU, I LENAOLA & W OUKO, SCJJ
DECEMBER 28, 2023
BETWEEN
ARVIND SHAH .................................................................................. 1ST APPELLANT
HARSHABEN SHAH ........................................................................ 2ND APPELLANT
GOSHRANI HOLDINGS LTD ........................................................ 3RD APPELLANT
COAST PROPERTIES LTD .............................................................. 4TH APPELLANT
COAST CLAY WORKS LTD ........................................................... 5TH APPELLANT
COAST MAIZE MILLERS LTD ....................................................... 6TH APPELLANT
SPA MILLERS NAIROBI LTD ......................................................... 7TH APPELLANT
HIGHWAY CENTRE LTD ............................................................... 8TH APPELLANT
AND
MOMBASA BRICKS & TILES LIMITED ................................... 1ST RESPONDENT
DINESH KUMAR ZAVERCHAND JETHA .............................. 2ND RESPONDENT
ATEET DINESH JETHA .............................................................. 3RD RESPONDENT
ZAVERCHAND SOJPAL JETHA HOLDINGS LTD .................. 4TH RESPONDENT
EXON INVESTMENTS LTD ....................................................... 5TH RESPONDENT
EXON PLASTICS LTD ................................................................. 6TH RESPONDENT
(Being an appeal from the Judgment and Orders of the Court of

Appeal at Mombasa (Visram, Karanja, Koome (as she then was)
JJ.A) delivered on 4th April, 2019 in Civil Appeal No. 117 of 2018)
A constructive trust can be imported into a land sale agreement to defeat a registered title.
The main issues before the Supreme Court were the applicability of constructive trusts to land sale agreements and
to the shareholding of a company. The Supreme Court held that a constructive trust can be imported into a land
kenyalaw.org/caselaw/cases/view/277640/ 1
sale agreement to defeat a registered title. A constructive trust could also be imported into a shareholding of a
company as to disentitle a registered holder of shares in a company obtained for valuable consideration.
Reported by John Ribia
Law of Trusts – trusts – constructive trusts – scope and purpose of constructive trusts - circumstances in which a
constructive trust was created – what were the circumstances in which a constructive trust would be created - what
was the definition, purpose and scope of constructive trusts - , section 2; section 3(1);
Land Law – trusts – constructive trusts – applicability of constructive trusts to land sale transactions - whether
the doctrine of constructive trust was applicable to land sale transactions - whether a constructive trust could be
imported into a land sale agreement to defeat a registered title - whether a constructive trusts could be considered as
an overriding interests that had the capacity to limit the rights of a property holder - , article 40; , section 2; section
3(1); of the (Act No 3 of 2012), sections 25, 26 and 28; section 163.
Company Law – trusts – constructive trusts– applicability of constructive trusts in the shareholding of a company
- whether a constructive trust could be imported into a shareholding of a company as to disentitle a registered
holder of shares in a company obtained for valuable consideration - whether a constructive trust could be imported
into a shareholding of a company as to disentitle a registered holder of shares in a company obtained for valuable
consideration - , article 40; section 30, 93, and 104; , section 119.
Civil Practice and Procedure – appeals – appeals to the Supreme Court – record of appeal – content and
endorsements on a notice of appeal – where a notice of appeal to the Supreme Court was not stamped – where the
appellant had not attached documents on the record that would be useful for a finding of facts - whether the failure
to have a notice of appeal to the Supreme Court stamped/endorsed by the Court of Appeal was fatal to the appeal -
whether appellants before the Supreme Court on question of general public importance were under an obligation to
file on the record documents that they filed in the superior courts below including documents that would be useful
for a determination of facts - whether the failure of an appellant before the Supreme Court to mark every tenth
line of the document was to the appeal was not fatal - , article 159(2)(d); section 15; rule 40(1)(d).
Jurisdiction – jurisdiction of the Supreme Court – appellate jurisdiction – jurisdiction to determine appeals
that raised matters of general public importance – extent of jurisdiction – where an appellant sought redress for
legal issues other than the issue certified as one of general public importance - whether the Supreme Court had the
jurisdiction to determine at its own discretion, other points of law raised in appeal other than the point of law that
was certified as a matter of general public importance – , article 163(4)(b).
Words and Phrases – trust – definition - the right, enforceable solely in equity, to the beneficial enjoyment of
property to which another held legal title; a property interest held by one person (trustee) at the request of another
(settlor) for the benefit of a third party (beneficiary) - The , 9th Edition.
Words and Phrases – constructive trust – definition - an equitable remedy that a court imposes against one who
has obtained property by wrong doing - The , 9th Edition.
Words and Phrases – shareholder – definition - an individual who owns or holds a share or shares in a company
- , 11th edition at page 1654.
Brief facts
Sometime in May, 2005, the respondents experienced nancial challenges as a result of debts incurred by the
1st respondent, and secured by the suit land that was registered in the name of the 1st respondent. The suit
property was however threatened with sale by the nancier, Standard Chartered Bank Ltd, to recover the
monies secured by it.
In an eort to save the suit property, the 2nd and 3rd respondents, at the time tasked with the running of the
1st respondent, sought the assistance of the 1st appellant. The 1st appellant recommended the restructuring
of the 1st respondent. The respondents acted upon the 1st appellant’s recommendations. To forestall the
looming auction, the 1st appellant approached Standard Chartered Bank Kenya Ltd with the resolution, the
sale agreement and a proposed settlement of the outstanding debt upon registration of title to the suit property
in favour of the 8th appellant or its nominee.
Standard Chartered Bank accepted the proposal on condition that 10% of the purchase price, being Kshs
2,700,000/-, be paid upfront as a non-refundable deposit and a guarantee for payment of the balance thereof
be given by a reputable bank. As a consequence, the 10% deposit and a bank guarantee by Giro Commercial
Bank were released to Standard Chartered Bank who in turn released the title of the suit property to the
advocates acting for both the 8th appellant and Giro Commercial Bank. A discharge of the charge in favour of
Standard Chartered Bank was subsequently registered. The incorporation of the 4th to the 7th appellants were
concluded with the shareholding comprising the 1st appellant, 4th respondent and the 3rd appellant each holding
20, 490 and 490 shares, respectively. The directors of the 4th to the 7th appellants were the 3rd respondent and
1st appellant. Subsequently, the 8th appellant nominated the 4th appellant to be registered as proprietor of the
suit property. The brick making plant and maize milling factory on the suit property were assigned to the 5th,
6th and 7th appellants.
Thereafter, the 4th appellant applied for a loan and an overdraft facility of Kshs 50,000,000/- from Giro
Commercial Bank to nance the purchase of the suit property and its working capital. The nancing
was approved on August 11, 2005. A fresh charge over the suit property was registered in favour of Giro
Commercial Bank and the balance of the outstanding loan released to oset the loan at Standard Chartered
Bank.
At the High Court several suits were led that sought to stay a declaration by the High Court that 4th, 5th,
6th and 7th appellants held the suit property in trust for the respondents; and to stay an order of injunction
that compelled the transfer of the suit property to the 1st respondent. The High Court found that the
respondents voluntarily made a resolution to sell the suit property and received an agreement for sale, had it
executed properly in accordance with the law; there was no coercion or undue inuence in the signing of the
sale agreement; and that the Memoranda and Articles of Associations of the companies incorporated for the
purpose of salvaging the suit property were freely negotiated, agreed and executed. The court further held that,
the sale agreement dated August 31, 2005 was valid, lawful and binding and it did convey and confer to the
purchaser a valid and good title to the land purchased.
The Court of Appeal found that the 1st and 3rd appellants held the shareholding in the 4th to the 7th appellant
companies in trust for the 1st respondent or its nominees, and the 4th appellant held the suit land in trust for
the 1st respondent. Whereas the 4th appellant’s title was registered under section 23 of the (repealed), the Court
of Appeal found it impeachable. Thus, it nullied the sale agreement and the transfer of the suit property to
the 4th appellant.
Aggrieved the appellants led the instant case where they contended that the Court of Appeal erred in holding
that the agreement for sale between the 8th appellant and the 1st respondent did not represent the will of the
parties and that the same had been procured through undue inuence and unconscionable bargains. It was
their case that the nding was contrary to the facts pleaded by the respondents that the agreement was a product
of negotiations.
The 3rd and 4th respondents’ led a preliminary objection premised on the grounds that the notice of appeal;
was not in compliance with rule 10 of the as the same was not signed and endorsed with the stamp of the
Deputy Registrar; that the paragraphs of the notice of appeal were not properly numbered, and that the record
of appeal was not complete as various documents that had been led in the Supreme Court below had not
been led before the Supreme Court. They sought for the notice of appeal to be struck out.
The respondents also urged the court that a constructive trust overrode the registered title where a party
had exerted undue inuence when obtaining and retaining the property transferred to him, as was the
circumstances in the instant case.
Issues
i. Whether the failure to have a notice of appeal to the Supreme Court stamped/endorsed by the Court
of Appeal was fatal to the appeal.
ii. Whether appellants before the Supreme Court on question of general public importance were under
an obligation to le on the record documents that they led in the superior courts below including
documents that would be useful for a determination of facts.
iii. Whether the failure of an appellant before the Supreme Court to mark every tenth line of the document
was to the appeal was not fatal.
iv. Whether the Supreme Court had the jurisdiction to determine at its own discretion, other points of law
raised in appeal other than the point of law that was certied as a matter of general public importance.
v. What were the circumstances in which a constructive trust was created?
vi. Whether the doctrine of constructive trust was applicable to land sale transactions and if so, whether
it could be imported into a land sale agreement to defeat a registered title.
vii. What was the legal framework governing constructive trusts in Kenya?
viii. Whether a constructive trust can be imported into a shareholding of a company as to disentitle a
registered holder of shares in a company obtained for valuable consideration.
Held
1. The notice of appeal was properly led before the Court of Appeal. Whereas the heading of the notice
of appeal indicated that it was led in regard to an application for grant of certication and leave to
appeal to the Supreme Court, its contents specied the intent to appeal against the decision of the
Court of Appeal rendered on April 4, 2019. The parties having engaged in the certication and leave to
appeal proceedings both at the Court of Appeal and before the Supreme Court, there was little doubt
left as to the appellants’ intention to appeal against the judgment of the Court of Appeal.
2. It was not for the Supreme Court to entangle itself in the ling and administrative processes of the
Court of Appeal. The failure to have an appeal stamped or endorsed by the Court of Appeal was not
fatal, as the notice of appeal was duly lodged in the Court of Appeal.
3. The instant case was a matter for determination of specic framed questions of general public
importance. The documents stated as missing from the record would be useful for the interrogation
of ndings of facts which fell outside the purview of the Supreme Court.
4. The failure by the appellants to mark every tenth line of the document, without condoning the same,
was not fatal. Article 159 (2) (d) of the obliged the Supreme Court to administer justice without undue
regard to procedural technicalities. The 3rd and 4th respondents’ preliminary objection had no merit.
5. An appeal was granted in specic terms by the or statute. An appeal thus typically lay to a higher court
and entailed a reconsideration of a decision by the higher court with a view to reversing it either in
part or in toto. The appellate jurisdiction of the Supreme Court derived from article 163(4) of the .
That involved an appeal as of right or an appeal on certication. The court could not exercise both
jurisdictions concurrently. The litigant chose the best path upon which the matter would be considered
within the established threshold. Unlike an appeal as of right where the court exercised its appellate
jurisdiction on the application and interpretation of the by the superior courts below, the jurisdiction
on certication was narrower as the court was only called upon to express its position on matters that
transcend the litigants before Court among other parameters set out in without necessarily sitting on
appeal between the parties before it. The Supreme Court was not just another appellate layer of courts
to oer remedy to parties dissatised with the decisions of the Court of Appeal.
6. It would always be a matter for the exercise of discretion whether to allow a point in no way connected
with the certied point of law to be argued on the appeal, and it was not to be assumed that an appellant
could as a matter of right raise any such point. None of the issues raised to challenge the jurisdiction
of the court suced.
7. The dened a “trust” and “trustee” as extending to implied and constructive trusts. A constructive
trust was an equitable instrument which served the purpose of preventing unjust enrichment. Trusts
were created either expressly, where the trust property, its purpose and the beneciaries were clearly
stated, or established by the operation of the law. Like in the instant case, where it was not expressly
stated, the trust may be established by operation of the law.
8. A constructive trust was a right traceable from the doctrines of equity. It arose in connection with the
legal title to property when a party conducted himself in a manner to deny the other party benecial
interest in the property acquired. A constructive trust would thus automatically arise where a person
who was already a trustee took advantage of his position for his own benet.
9. The doctrines of equity were applicable in Kenya vide section 3(1) of the and formed part of Kenyan
laws. Common law, doctrines of equity and statutes of general application applied in so far as the
circumstances of Kenya and its inhabitants permitted and subject to such qualications as those
circumstances rendered necessary.
10. Courts imported the doctrines of implied, resulting and constructive trust as known in English law
vide section 163 of the (repealed) , into section 28 of the (repealed). The doctrine of constructive trust
was therefore applicable to land sale transactions.
11. Every person either individually or in association with others, had the right to acquire and own
property of any description, and in any part of Kenya. That right to property was however not absolute.
Under article 40(3) of the , the State may deprive a person of property through a process of acquisition
of land for a public purpose or in public interest in accordance with the . Further, under article 40(6)
the rights to property did not extend to any property that had been found to have been unlawfully
acquired.
12. While article 40 had an internal limitation on the right to property, the general limitation of rights
provision at article 24 of the provided that any limitation on a right shall be by law, and only to the
extent that the limitation was reasonable and justiable.
13. While sections 25, 26 and 28 of the recognized that the rights of a registered proprietor of land were
absolute and indefeasible, those were only subject to rights and encumbrances noted in the register
and overriding interests. The overriding interests included trusts. In the absence of any limitation as to
the trusts, that included constructive trusts. Applying the provisions of article 24 of the therefore, the
limitation of the right to property was provided under law, and included a constructive trust. Section 28
of the provided that the registration was subject to overriding interests. One of the overriding interests
was a trust, which included constructive trust.
14. Constructive trusts could arise in various circumstances, including in land sale agreements. A trust
was an equitable remedy which was an intervention against unconscionable conduct. Where the
circumstances of the case were such that it would demand that equity treated the legal owner as a
trustee, the law would impose a trust. It was imposed by law whenever justice and good conscience
required it. A constructive trust can be imported into a land sale agreement to defeat a registered title.
15. The made provision to govern all types of companies. Section 20 provided for the articles of association
as the of the company. Pursuant to section 26, for existing companies before the commencement of
the Act, such as the companies in the instant suit, the memorandum of association was treated as
provisions of the articles. Companies therefore had a free hand in managing their own aairs through
those constitutive documents. Under section 30(1), the company’s constitution bound the company
and its members to the same extent as if the company and its members had covenanted, agreed with
each other to observe the . A court could not interfere with the internal aairs of a company except
for limited circumstances.
16. Section 93 of the required the company to keep a register of its members including information relating
to benecial owners of the company, if any. Section 104(1) however provided that a company shall
not accept, and shall not enter in its register of members, notice of any trust, expressed, implied or
constructive. Section 104(1) was similarly contained in section 119 of the (cap 486)(repealed) which
provided that no notice of any trust, expressed, implied or constructive, was to be entered on the
register, or be receivable by the registrar.
17. Section 105 of the stated that until the contrary was proved, the register of the members of a company
was evidence of the matters required or authorised to be included in it. The expressly provided that
there could be no entry of a trust on the company register.
18. Whereas section 104 of the proscribed the entry of trusts on the register of members, the intention of
the provision was not to bar any trust arrangements, including constructive trusts. There was no bar
to the holding of share(s) upon a trust.
19. Where there was unconscionable or inequitable behaviour, a trust was imposed as the most appropriate
remedy. A constructive trust can be imported into a shareholding of a company. Section 104 of the did
not outlaw or bar importation of trust into the shareholding of a company. A shareholding signied
proprietorship in a company to the extent of the share(s) held. Company shares constituted property
under article 260 of the and therefore, where it was found that there was a wrong doing, then a
constructive trust may be inferred. In the instant case, a constructive trust had therefore been created.
20. The focus of the Supreme Court was on the recourse, rather than the applicability of the doctrine of
trust. The court was not persuaded to re-open the merits of the Court of Appeal decision in concluding
the applicability of the trust. Litigation had to come to an end. The Court of Appeal, having satised
itself of the facts, came to one conclusion and made its orders. A decision arising out of adversarial
litigation was not bound to be satisfactory to both parties and undoubtedly, dierent courts would
come to dierent conclusions on the same facts. Re-opening the facts was not appropriate under
circumstances, and would be going beyond the Supreme Court’s constitutional remit.
21. Courts were an integral part of the Kenyan judicial system, they were entrusted with the responsibility
of adjudicating disputes and administering justice, in accordance with the ’s ethos, values and
principles. In carrying out their judicial duties, they were obligated to adhere to the principles outlined
under article 159 of the . That guaranteed that the objectives and tenets of the were upheld.
22. [Obiter] “A trend towards promotion of legal certainty, safeguarding of property rights, and equitable
access to justice undoubtedly emphasizes the necessity for a revision of the legislation governing the
registration of trusts (including constructive) in relation to shares held in a company. These changes
would be indicative of a growing recognition of the importance of constructive trust as a means of
addressing unjust enrichment and ensuring equitable outcomes in disputes. Legislation that is in line with
international developments and prevailing standards can enhance the strength and adaptability of the
legal system, enabling it to more effectively tackle present day issues pertaining to shareholding, property
rights and fair redress. It provides an opportunity for courts to shape the legal landscape concerning
providing clarity particularly on enforcing remedies when breaches or unfairness occur.”
23. [Obiter] “We however, note that there may be legal uncertainty over the recourse that parties have upon
declaration of trust by the Courts and how to actualise the same especially concerning shareholding. While
it is open to each court to have regard to the specific circumstances, we think this is an issue that the
Kenya Law Reform Commission, the Attorney General, Parliament and all the stakeholders should give
consideration whether there is need for legislative intervention.”
Appeal dismissed.
Orders
Each party was to bear its own costs.
Citations
Cases
1. Dhanjal Investments Limited v Kenindia Assurance Company Limited (Petition 7 of 2016;
[2018] KESC 16 (KLR)) — Explained
2. Dina Management Limited v County Government of Mombasa & 5 others (Petition 8 (E010) of 2021;
[2023] KESC 30 (KLR)) — Explained
3. Euromec International Limited v Shandong Taikai Power Engineering Company Limited (Civil Case
E527 of 2020; [2021] KEHC 93 (KLR)) — Explained
4. Hatayan, Twalib & another v Said Saggar Ahmed Al-Heidy & 5 others (Civil Appeal 51 of 2014;
[2015] KECA 713 (KLR)) — Explained
5. Kitilit v Kibet (Civil Appeal 51 of 2015; [2018] KECA 573 (KLR)) — Explained
6. Macharia & another v Kenya Commercial Bank Limited & 2 others (SC Appl. No 2 of 2011 [2012]
eKLR; [2012] 3 KLR 199) — Explained
7. Maina & 87 others v Kagiri (Civil Appeal 6, 26 & 27 of 2011; [2014] eKLR) — Explained
8. Mitu-Bell Welfare Society v Kenya Airports Authority & 2 others; Initiative for Strategic Litigation in
Africa (Amicus Curiae) (Petition 3 of 2018; [2021] KESC 34 (KLR)) — Explained
9. Moi University v Zaippeline & another (Petition 43 of 2018; [2022] KESC 29 (KLR)) — Explained
10. Mokoosio, Martin Lemaiyan & another v Reshma Praful Chandra Vadera & 3 others (Petition
13 of 2020; [2021] KEHC 7677 (KLR)) — Explained
11. Njihia v Kimani & another (SC Appl No 3 of 2014 [2015] eKLR) — Explained
12. Ravate, Farouk & another v Eric Agbeko & 2 others ; Ravasam Development Company Limited
(Interested Parties) (Civil Case 450 of 2011; [2020] KEHC 8063 (KLR)) — Explained
13. Salesio M'itonga v M'arithi M'athara & 3 others (Civil Appeal 6 of 2013; [2015] KECA 772 (KLR))
— Explained
14. Steyn v Giovanni Gnecchi-Ruscone (Application 4 of 2012; [2013] KESC 11 (KLR)) — Explained
15. Tanui & 4 others v Birech & 11 others (? 107 of 1991; [1991] KECA 6 (KLR)) — Explained
16. Twaha v Abdalla & 2 others (Civil Application 35 of 2014; [2015] eKLR) — Explained
17. MacDonald v Creelman ((1988), 83 N.S.R (2d) 415) — Explained
18. Murdoch v Murdoch ([1975] 1 SCR 423) — Explained
19. Soulos v Korkontzilas ([1997] 2 SCR 217) — Explained
20. Attorney-General for Northern Ireland v Gallagher ([1963]AC 349) — Explained
21. Chappell & Co Ltd v Nestley Co Ltd ([1959] All ER 701) — Explained
22. Kane v Radley ([1999] CH 274) — Explained
23. Neville v Wilson ([1996] 3 All E.R 171 (CA)) — Explained
24. Royal Bank of Scotland vs Etridge ((No 2) (2002) AC 773) — Explained
25. Thomas v Thomas ([1842] 2QB 851) — Explained
26. Westdeustsche Landerbank Girozentrale v Islington LBC ([1968] 2 AC 669) — Explained
27. Harris Tr & Sav Bank v Salomon Smith Barney Inc (530 US 238, 250–51 (2000)) — Explained
28. Moore v Crawford (130 US 122, 128 (1889)) — Explained
Statutes
1. Companies Act (cap 486 repealed) — section 119 — Interpreted
2. Companies Act, 2015 (Act No 17 of 2015) — section 30, 93, 104, 105, 165 — Interpreted
3. Constitution of Kenya, 2010 — article 40, 159, 163(4)(b), 164(4), 260 — Interpreted
4. Court of Appeal Rules, 2010 (cap 9 sub leg) — rule 10 — Interpreted
5. Evidence Act (cap 80) — section 97(1) — Interpreted
6. Judicature Act (cap 8) — section 3(1) — Interpreted
7. Land Registration Act, 2012 (Act No 3 of 2012) — section 25, 28, 36, 41, 43, 44 — Interpreted
8. Law of Contract Act (cap 23) — section 3 — Interpreted
9. Registered Land Act (cap 300 repealed) — section 163 — Interpreted
10. Registration of Titles Act (cap 281 repealed) — section 23 — Interpreted
11. Supreme Court Act, 2011 (Act No 7 of 2011) — section 3A, 20, 21, 27 — Interpreted
12. Supreme Court (General) Practice Directions, 2020 (Act No 7 of 2011 sub leg) — rule 11 —
Interpreted
13. Supreme Court Rules, 2020 (Act No 7 of 2011 sub leg) — rule 11, 26(3), 39(1)(b), 40 — Interpreted
14. Trustee Act (cap 167) — In general — Cited
15. Companies Act, 2006 — section 126 — Interpreted
Texts
1. Garner, BA., (ed) (2009), Black’s Law Dictionary (St Paul Minnesota: West Group 9th Edn)
2. Hogg, QM., (Lord Hailsham) et al (eds) (1995), Halsbury’s Laws England (London: Butterworth 4th
Edn Vol 48 (1) para 690)
3. Scott A.W (ed) (1967), Law of Trusts (Saul Touster, University at Bualo School of Law; 3rd edition
3215)
Advocates
Francis Wasuna & Hannington Amol for Appellants (ALP Kenya Advocates)
Mohammed Nyaoga SC for 1st & 2nd Respondents
Wamuti Ndegwa for 3rd & 4th Respondents
Ambrose Weda for 5th & 6th Respondents
JUDGMENT
Representation:
Francis Wasuna & Hannington Amol for the Appellants
(ALP Kenya Advocates)
Mohammed Nyaoga SC for the 1st & 2nd Respondents
(Mohammed Muigai Advocates LLP)
Wamuti Ndegwa for the 3rd & 4th Respondents
(Ndegwa & Sitonik Advocates)
Ambrose Weda for the 5th & 6th Respondents
(Weda & Co. Advocates)
A. Introduction
1. This petition of Appeal dated July 28, 2022 challenges the decision of the Court of Appeal in Civil
Appeal No 117 of 2018 delivered on April 4, 2019. It is led pursuant to the court’s Ruling dated July
8, 2022. In the said ruling, we granted the appellants leave to appeal to the Supreme Court, limited to
the following issues certied as being of general public importance:
i. Whether a constructive trust can be imported into a land sale agreement to defeat a registered
title therefrom; and
ii. Whether a constructive trust can be imported into a shareholding of a company as to disentitle
a registered holder of shares in a company obtained for valuable consideration.
B. Background
2. Sometime in May, 2005, the respondents experienced nancial challenges as a result of debts incurred
by the 1st respondent, and secured by Plot No 500/VI/Mainland North (Title No CR 4xxx) (suit
property) registered in the name of the 1st respondent. The suit property housed a brick factory, a maize
mill factory, a coconut extracting factory, a go-down, oce blocks, a workshop, a residential house,
ancillary buildings and included various machines and equipment. The brick making machinery and
equipment, other movable and immovable assets were not part of the security but were attached to the
suit property. The suit property was however threatened with sale by the nancier, Standard Chartered
Bank Ltd, to recover the monies secured by it.
3. In an eort to save the suit property, Dinesh and Ateet Jetha, the 2nd and 3rd respondents, at the time
tasked with the running of the 1st respondent, sought the assistance of the 1st appellant, Arvind Shah, a
close and trusted friend perceived to be an experienced and successful businessman running numerous
protable companies. The 1st appellant recommended the restructuring of the 1st respondent. This
involved the incorporation of two holding companies, Zaverchand Sojpal Jetha Holdings Ltd, the 6th
respondent, to be owned 100% by the respondents and Goshrani Holdings Ltd, the 3rd appellant, to
be owned by the 1st appellant or his agents. These two companies would then incorporate four other
companies to hold various assets of the 1st respondent. The four incorporated companies are: Coast
Properties Ltd; Coast Maize Millers Ltd; Coast Clay Works Ltd; and Spa Millers Nairobi Ltd, which are
the 4th, 5th, 6th and 7th appellants, respectively. At incorporation, the companies did not own any assets.
The companies were to hold the 1st respondents’ assets for the sole benet of the respondents during
the process of repayment of the facility and redeeming the assets from the charge held by Standard
Chartered Bank Kenya Ltd.
4. The respondents acted upon the 1st appellant’s recommendations. Before the incorporation of the
companies was complete, the 1st respondent passed a resolution dated June 2, 2005 to sell the suit
property. Subsequently, a sale agreement between the 1st respondent and the 8th appellant was entered
into for the sale of the suit property for the sum of Kshs 27,000,000/- equivalent to the outstanding
loan amount owed to Standard Chartered Bank Kenya Ltd.
5. To forestall the looming auction, the 1st appellant approached Standard Chartered Bank Kenya Ltd
with the resolution, the sale agreement and a proposed settlement of the outstanding debt upon
registration of title to the suit property in favour of the 8th appellant or its nominee. Standard Chartered
Bank accepted the proposal on condition that 10% of the purchase price, being Kshs 2,700,000/-, be
paid upfront as a non-refundable deposit and a guarantee for payment of the balance thereof be given
by a reputable bank. Concurrently, the 1st appellant sought nancing from Giro Commercial Bank
Limited who had agreed to oer a loan facility secured by the suit property.
6. As a consequence, the 10% deposit and a bank guarantee by Giro Commercial Bank were released to
Standard Chartered Bank who in turn released the title of the suit property to the Advocates acting
for both the 8th appellant and Giro Commercial Bank. A discharge of the charge in favour of Standard
Chartered Bank was subsequently registered.
7. In the meantime, the incorporations of the 4th to the 7th appellants were concluded with the
shareholding comprising the 1st appellant, 4th respondent and the 3rd appellant each holding 20, 490
and 490 shares, respectively. The directors of the 4th to the 7th appellants were the 3rd respondent and 1st
appellant. Subsequently, the 8th appellant nominated the 4th appellant to be registered as proprietor of
the suit property. The brick making plant and maize milling factory on the suit property were assigned
to the 5th, 6th and 7th appellants.
8. Thereafter, the 4th appellant applied for a loan and an overdraft facility of Kshs 50,000,000/- from Giro
Commercial Bank to nance the purchase of the suit property and its working capital. The nancing
was approved on August 11, 2005. A fresh charge over the suit property was registered in favour of
Giro Commercial Bank and the balance of the outstanding loan released to oset the loan at Standard
Chartered Bank.
9. Seemingly, underlying issues concerning the shareholding and controlling interest of the companies
therein surfaced in the year 2009 resulting in the institution of numerous suits by the parties.
C. Litigation History
i. High Court
10. Several suits were led at the High Court being, HCCC No 2, 21, 22, 23, 24 all of 2009, Misc No 4
of 2009 and HCCC No 9 of 2011. Pursuant to the trial court’s directions on July 26, 2012, all the
cases were stayed pending determination of HCCC No 9 of 2011 whose outcome would guide the
related cases.
11. In Mombasa High Court Civil Case No 9 of 2011 against the appellants, the respondents sought the
following orders:
a. A declaration that the 4th, 5th, 6th and 7th appellants held and continue to hold the piece of land
known as 500/VI/MN and all the attachments thereto in trust for the respondents.
b. A mandatory injunction compelling the defendants herein to unconditionally transfer the title
and interest on plot No 500/VI/MN back to the 1st respondent or the respondents and or
their nominee.
c. In the alternative, a setting aside or nullifying the purported agreement of the sale dated August
31, 2005 in respect of the transfer of the land from the 1st respondent to the 4th appellant.
In the alternative and without prejudice to the above,
a. A declaration that the shares held by the 1st and 3rd appellants in the 4th, 5th, 6th and 7th appellant
companies are held by the said 1st and 3rd appellants in trust for the respondents.
In a further alternative,
i. As against the 1st, 3rd and 4th, 5th, 6th and 7th appellants, the said appellants be ordered to pay
the respondents through the 1st respondent 50% of the market value of the suit plot No 500/
VI/MN, brick manufacturing machinery and every asset of the respondent as at the date of
valuation actual payment.
In a further alternative,
a. As against the 4th, 5th, 6th and 7th appellants, the honourable court be pleased to order that the
respective contributions into the past and present assets of the 4th, 5th, 6th and 7th appellants as
between the respondents and the 1st, 2nd, and 3rd appellants be assessed by an auditor appointed
jointly by the parties hereto or by the court.
b. The value of the assets and in particular plot No 500/VI/MN and the brick manufacturing
machinery over and above the nominal value of the shares be declared to be share premium
and be transferred to the share premium account.
c. The 4th, 5th, 6th and 7th appellant companies be directed to increase their authorised capital and
issue such bonus shares as the court will direct from the said share premium and the said share
premium capital be deemed as allotted and issued to the shareholders according to their actual
proportionate contribution to the assets of the company and the memorandum and Articles
of Association and or share register be deemed as amended accordingly and share certicates
issued.
d. Any other relief as the Honourable Court may deem t.
12. The appellants led a defence and counterclaim seeking inter alia the following orders:
a. Mombasa High Court Civil Suit Nos 2, 21, 22, 23 and 24 of 2009 be dismissed with costs to
the 1st, 2nd and 3rd appellants.
b. The 1st, 2nd and 3rd respondents jointly and severally be ordered to pay mesne prot to the 3rd
appellant in the sum of Kshs 1,200,000/- per month from May 1, 2013 until the 2nd and 3rd
respondents vacate the suit premises.
c. The 1st respondent be restrained from running the aairs of the 3rd and 4th appellants without
the involvement of the 1st and 2nd appellants.
d. A perpetual injunction be issued against the 2nd, 3rd and 4th respondents from engaging in any
business, trade or manufacture of any item in the suit premises.
e. An order of eviction to evict the 2nd and 3rd respondents from the suit premises.
f. A declaration that the 1st and 2nd appellants are entitled to the shares they hold in the 4th-7th
appellants.
g. Punitive and aggravated damages against 3rd respondent for trespass/conversion.
13. The respondents alleged that the 1st appellant, Arvind Shah, had misrepresented his true intention in
oering his advice to the 1st respondent, took advantage of the 1st respondent’s vulnerable situation
and Ateet Jetha’s inexperience to induce the 1st respondent to enter into the arrangement it did.
Furthermore, the respondents contended that the sale of the suit property to the 8th appellant was
unconscionable since the amount of Kshs 27,000,000/- allegedly paid as consideration was nowhere
near the value of the land which at the time was estimated at Kshs 150,000,000/-.
14. On the other hand, the appellants denied the allegations and averred that the 1st respondent’s
resolution, sale agreement and transfer of the suit property spoke for themselves. According to Arvind,
when he set out to oer his assistance and or advice he did not do so on a philanthropic or charitable
basis. He did so as a business venture expecting returns and benets for his eort. It is on that basis that
he mobilized not only his resources but those of his family members and companies associated with
them to salvage the assets in question. That he went to great lengths to halt the auction and obtain
the requisite nancing from Giro Bank to pay o the outstanding debt to Standard Chartered Bank.
That it was agreed that in exchange for his assistance he and the 3rd appellant would hold a controlling
interest in the 4th to 7th appellant. Thus, the 1st appellant denied exerting any undue inuence or making
any misrepresentation with respect to his intention of getting involved with the respondents.
15. The parties consented to the determination of the following issues at the High Court : whether the
document dated 2.06.05 described as a resolution by the 1st respondent Company to sell land known
as subdivision number No 500 section VI Mainland North, is a lawful document or a document
obtained by unlawful means; whether the document dated 31.08.05 is a lawful Agreement of Sale of
subdivision number No 500 section VI Mainland North by the 1st respondent to the 8th appellant/
nominee or whether it was obtained by unlawful means; whether the document described as a transfer
of subdivision Number No 500 section VI Mainland North from the 1st appellant to the 4th appellant is
a lawful transfer, whether the consideration was paid and whether it was obtained by unlawful means;
and whether the shareholding structure in the Memorandum and Articles of Association of the 4th,
5th, 6th and 7th appellant embody a lawful shareholders agreement between the respondents and the 1st,
2nd and 3rd appellants or whether that structure was procured by unlawful means. All other issues in
the suit and counterclaim would abide the determination of these 4 (four) issues.
16. In its judgment dated December 22, 2017, the High Court determined that; the resolution dated June
2, 2005 by the 1st respondent was valid and not amenable to disturbance by the court; the respondents
voluntarily made a resolution to sell the suit property and received an agreement for sale, had it executed
properly in accordance with the law; there was no coercion or undue inuence in the signing of the
sale agreement; and that the Memoranda and Articles of Associations of the companies incorporated
for the purpose of salvaging the suit property were freely negotiated, agreed and executed. The court
further held that, the sale agreement dated August 31, 2005 was valid, lawful and binding and it did
convey and confer to the purchaser a valid and good title to the land purchased.
17. The trial court also found that the parties executed the agreement for sale as well as the transfer
for a consideration of Kshs 27,000,000/-, a sum which was paid to Standard Chartered Bank as a
chargee who had moved to exercise its statutory power of sale. It found that the shareholding structure
exhibited in the Memorandum and Articles of Association had not undergone any alterations but
remained as they were at incorporation, and the respondents did not prove the accusations of undue
inuence or coercion. It observed that once a Memorandum and Articles of Association is registered,
it binds the members, and the members cannot unilaterally denounce any provision thereto or just
renege therefrom. As to the counterclaim, the court stated that by virtue of the ownership of the suit
property, the 4th appellant is entitled to the benets owing from such proprietorship. The court also
upheld the 4th appellant’s rights as fundamental under article 40 of the Constitution.
ii. Court of Appeal

18. Aggrieved by the decision of the High Court, the respondents led Civil Appeal No 117 of 2018
premised on 30 grounds of appeal while the appellants led a cross appeal. The Court of Appeal framed
the issues for determination as: whether the parties were proper parties to the suit; whether the shares
held by the 1st and 3rd appellants are held in trust for the 1st respondent or its nominees; whether the 4th
appellant holds the suit land in trust for the 1st respondent or its nominees; whether the sale agreement
and transfer of the suit land should be nullied; whether the circumstances surrounding the dispute
called for lifting of the corporate veil of the concerned companies; whether the imposition of payment
of mesne prots on the 5th and 6th respondents was proper; whether there was legal basis for directing
the audit of the accounts held by the 5th and 6th respondents; whether an inspector should have been
appointed under section 165 of the Companies Act to inspect the 5th respondent’s aairs; and whether
the learned judge erred in not granting costs to the appellants or imposing interest on the mesne prots
and misappropriated funds.
19. In its judgment delivered on April 4, 2019, the Court of Appeal allowed the appeal and dismissed the
cross appeal. It held that; the parties before the court were well suited for purposes of the determination
of the dispute as each party played a role in the dispute; there was a relationship of trust between the
respondents and the 1st appellant, who oered to reorganize and restructure the respondents’ business
in order to salvage the suit property; instead of using his position as a trustee, the 1st appellant set out a
scheme to purchase the property at Kshs 27,000,000/- unjustly enriching himself and he was conicted
between his duties as a trustee and his scheme to purchase the property. It further held that, there was a
presumption of undue inuence on the part of the 1st appellant as the net eect of the documents giving
rise to the arrangement the parties found themselves in did not reect the true and independent consent
of the 1st to 4th respondents. The transactions thus met the criteria of being regarded as unconscionable
bargains. The court lifted the corporate veil of the 3rd and 8th appellants holding that the companies
were used to cover the 1st appellant’s improper conduct. The court in that regard deemed the said
appellants to be one and the same with respect to the transaction in issue.
20. The Court of Appeal further found that the 1st and 3rd appellants hold the shareholding in the 4th to the
7th appellant companies in trust for the 1st respondent or its nominees, and the 4th appellant holds the
suit land in trust for the 1st respondent. Whereas the 4th appellant’s title is registered under section 23
of the repealed Registration of Titles Act, the Court of Appeal found it impeachable. Thus, it nullied
the sale agreement dated August 31, 2005 and the transfer of the suit property to the 4th appellant.
C. Proceedings Before The Supreme Court
a. Appellants’ case
21. Dissatised with the decision of the Court of Appeal, the appellants have preferred the instant appeal.
They seek the following orders:
a. The Petition of appeal be allowed.
b. The Judgment of the Court of Appeal in Mombasa Civil Appeal No 117 of 2018 dated April
4, 2019 be quashed and set aside.
c. The honourable Court reinstates and upholds in entirety the judgment of the High Court in
Mombasa Civil Case No 9 of 2011 and delivered on February 26, 2015 be upheld. (sic)
d. Alternative to (c) above, having set aside the Court of Appeal decision, the honourable court
does substitute it with the honourable court’s own decision.
e. Any other remedy the honourable court may deem just in the circumstances.
f. Costs of the appeal and the suits in the courts below be met by the respondents jointly and
severally.
22. The appeal is premised on 28 grounds, reframed for precision as follows: that the learned judges erred
in law and in fact in;
i. Finding that the agreement dated August 31, 2005 between the 8th appellant and the 1st
respondent did not represent the will of the parties and that the same was entered through
undue inuence, and unconscionable bargain.
ii. Finding that the 1st appellant was at all material times in a duciary relationship of a trustee
to the respondents when no such relationship or expectation existed and misconstruing that
the suit property in the agreement of sale dated August 31, 2005 was being held in trust for
the 1st respondent.
iii. Failing to interpret and apply the provisions of the Law of Contract Act and laws relating to the
disposal of rights in land hence varied material provisions of a written contract for sale of land
duly executed by parties thereto and duly registered.
iv. Reaching a judgment that erroneously overrode established principles of contract and the
provisions of section 3 Law of Contract Act, sections 36, 41, 43 and 44 of the Land Registration
Act.
v. Relying on contested and unproven facts to conclude that the actual value of the suit land
was Kshs 150 million and attempting to write a new contract when on the face of the said
consideration, the consideration was sucient.
vi. Finding that the shares held by the 1st, 2nd, and 3rd appellants in the 4th, 5th, 6th and 7th appellants
were wholly held in trust for the 1st and 3rd respondents and declaring that a trust existed
between the parties in the entire arrangement when no elements of trust were present thereby
depriving the 1st and 3rd appellants of their property as well as shares in 4th - 7th appellants.
vii. Introducing a non-existent unwritten shareholders agreement to vary the terms of the
Memorandum and Articles of Association of a company hence overriding the provisions of
sections 30, 93, 104 and 105 of the Companies Act.
viii. Finding that the 1st, 2nd and 3rd appellants had not demonstrated that they paid consideration
to acquire the shares in the 4th, 5th,6th and 7th appellants.
ix. By ordering the appellants to continue servicing obligations towards the credit facilities
obtained by the 4th - 7th appellants when the court found that they had no claim or equitable
interest in the said companies.
x. Lifting the corporate veil to nd that the 1st appellant was the gure behind the 8th and 3rd
appellants.
23. In support of their petition, the appellants led Submissions dated May 8, 2023 and rejoinder
submissions dated May 23, 2023. In addition, they led a rejoinder dated November 24, 2023 in
response to the 1st and 2nd respondents’ replying adavit and grounds of objection separately led by
the 3rd and 4th respondents, and the 5th and 6th respondents.
24. On the jurisdiction of the court, the appellants submit that sections 3A, 21 and 27 of the Supreme Court
Act, 2011 grant the court wide powers to make such orders as may be necessary for the administration
of justice, and its decisions are not mere interpretations to render the appeal an academic exercise.
Further, the appellants aver that section 20 of the Supreme Court Act and rule 26(3) of the Supreme
Court Rules 2020 give the court powers to consider facts, re-appraise evidence and draw inferences of
facts, and the court is not bound by the ndings of fact and so the court can go beyond any framed
issue in administering justice. In support of this averment, the appellants rely on this court’s decision
in Moi University v Zaippeline & another Petition 43 of 2018 [2022] KESC 29 (KLR)(Civ), (17 June
2022) (Judgment) Dhanjal Investments Limited v Kenindia Assurance Company Limited SC Petition
No 7 of 2016 [2018] eKLR and Attorney-General for Northern Ireland v Gallagher [1963]AC 349.
25. On whether a constructive trust can be imported into a land sale agreement to defeat a registered title
resulting therefrom, they submit that the Court of Appeal erred in holding that the agreement for sale
dated August 31, 2005 between the 8th appellant and the 1st respondent did not represent the will of the
parties and that the same had been procured through undue inuence and unconscionable bargains.
It is their case that this nding is contrary to the facts pleaded by the respondents that the agreement
was a product of negotiations.
26. The appellants urge that the impugned judgment overrode established principles of contract and the
provisions of sections 3 of the Law of Contract Act, 97 (1) of the Evidence Act, 36, 41, /43 and 44 of
the Land Registration Act that a written contract for disposing interest in land or a written contract
cannot be unilaterally amended by parole evidence as was armed by this Court in Moi University v
Zaippeline & another (Petition 43 of 2018) [2022] KESC 29 (KLR) (Civ) (17 June 2022) (Judgment).
27. The appellants contend that the Court of Appeal erred in attempting to rewrite the agreement as
regards the consideration. They submit that the 3rd respondent testied that the forced sale value of
the suit property was Kshs 60 million which was consistent with the valuation by Tysons and Houthi
Valuers. In addition, they submit that the government valuation for purposes of stamp duty placed the
value at Kshs 40 million. They contend that the values pleaded did not place the value at more than
Kshs 70 million, therefore, the Court of Appeal shed the amount of Kshs 150 million from a letter
the 1st appellant had written to Giro Commercial Bank estimating the value of the suit property at
Kshs 150 million which was a statement to entice the bank to agree to provide a loan but not based
on any formal valuation. They submit that the Court of Appeal disregarded an elementary principle
of contract law that a contract consideration needs only to be sucient but not adequate. They rely
on Thomas v Thomas [1842] 2QB 851 and Chappell & Co Ltd v Nestley Co Ltd [1959] All ER 701
to buttress this argument.
28. On whether a constructive trust can be imported into a shareholding of a company as to disentitle a
registered holder of shares in a company obtained for a valuable consideration, they fault the Court
of Appeal for declaring that the shares held by the 1st to 3rd appellants in the 4th -7th appellants were
being held wholly in trust for the 1st and 3rd respondents. They contend that shareholding as spelt out
in the Memorandum and Articles of Association was a product of negotiations and a trust did not
therefore arise.
29. They posit that the 2nd and 3rd respondents conceded, by their testimonies, that they had negotiated
extensively with the 1st appellant regarding shareholding and agreed at 50:50 benecial ownership. In
this context, they aver that the respondents had, in Mombasa High Court in Civil Case No 22 of 2019,
sought to compel the 1st appellant and his associates to meet their part of the bargain by paying Kshs 35
million for the 51% shares they had been allotted in the companies at incorporation. It is their case that
the Court of Appeal ought to have compelled the respondents to be bound by their own pleadings
that conrmed that there was an agreement to acquire the shares by the 1st appellant. Further, they
submit that the 1st appellant provided Kshs 35 million to the 4th to the 7th appellants towards achieving
optimum working capital to enable the companies access credit facilities to bankroll the businesses,
which contribution is admitted by the respondents. They therefore faulted the Court of Appeal’s
ndings that the 1st, 2nd and 3rd appellants had not demonstrated that they paid for consideration to
acquire shares in the 4th - 7th appellants.
30. On the existence of a duciary relationship that could lead to constructive trust, they rely on the Court
of Appeal decision in Macharia Mwangi Maina & 87 others v Davidson Mwangi Kagiri [2014]
eKLR where the court described constructive trust as an equitable concept that acts on the conscience
of a duciary to prevent a person from acting unconscionably to defeat the common intention. In
this context, they submit that the court deed its own precedents and failed to properly assess the
two critical ingredients of constructive trust, guilty conscience and common intention. They contend
that the dispute that the Court of Appeal ought to have determined was whether the appellants had
met their commitment to contribute to 51% shares of the business and if not, what remedy would
be available. Further, that at the outset of the negotiation the 1st appellant made his proposal to the
respondents to acquire 51% stake and that he would pay o the Standard Chartered Bank loan using
his money as his contribution to the partnership, a fact that was admitted by the 2nd respondent. They,
therefore, submit that the relationship was an investment relationship and not that of trusteeship.
31. As for lack of an unconscionable bargain, they disagree with the Court of Appeal’s conclusion in that
regard, adding that the court failed to pay attention to the ingredients of such a bargain. They argue
that what constitutes an unconscionable bargain was discussed in Euromec International Limited v
Shandong Taikai Power Engineering Company Ltd [2021] KEHC 93 KLR. They submit in that regard
that the Court of Appeal ought to have considered whether as at 2005, when the respondents were deep
in debt and facing imminent and destructive action, the 1st appellant’s action led to the respondents
salvaging 49% of what they would have lost, entirely reviving a business that had been dead for nearly
10 years.
32. The appellants urge that equity aids the vigilant and not the indolent because the respondents alleged
that by 2006, they were already aware that the 1st appellant had behaved inequitably yet they only led
a suit in 2009, and thereby are guilty of laches. In addition, they urge that there was no threat, undue
inuence or coercion on the respondents to make any payments.
33. They argue that the respondents had ample opportunity to seek independent legal advice on each of the
agreements and that the 3rd respondent admitted that despite this opportunity, they nevertheless did
not see the need to seek such legal advice. They added that the respondents were represented in the sale
transaction by their own advocates, James Gitau Singh Advocates, and that the Advocate who drafted
the Memorandum and Articles of Association was working with the said Gitau Singh Advocates.
34. Moreover, the appellants submit that a constructive trust is not a tool for rebalancing a relationship
to aid a supposedly weaker party in obtaining a bargain or improved terms, as the Court of Appeal
purported to do. They rely on Westdeustsche Landerbank Girozentrale v Islington LBC [1968] 2 AC
669 where the court held that constructive trust only exists where the defendant has knowledge of some
factors that aect his conscience and that the 1st appellant did not in this case have a guilty conscience.
They thus seek that the court do allow the appeal, set aside the impugned decision of the Court of
Appeal and reinstate the High Court decision.
b. Respondents’ Case
i. The 1st and 2nd respondents

35. In response to the petition, the 1st and 2nd respondents led a replying adavit sworn on November
17, 2022 by Ateet Dinesh Jetha, the 3rd respondent. They also led Submissions and supplementary
submissions all dated May 26, 2023.
36. The 1st and 2nd respondents, as a preliminary point, submit that the court’s jurisdiction can only be
exercised with regard to the two issues that were determined to have met the set standards under article
163(4)(b) of the Constitution. They aver that this being a second appeal, it should be conned to points
of law and that the court should not interfere with the factual ndings by the Court of Appeal. They
further argue that the instant appeal raises 7 grounds of appeal for determination by this court, 5 of
which raise matters of fact contrary to the jurisdiction of the court. They posit that the court ought
not to be compelled to evaluate the factual evidence but only cardinal issues of law or jurisprudence.
37. On the rst issue of importing a constructive into a land sale agreement to defeat a registered title
resulting therefrom, they submit that the question before this court is not whether the 1st appellant
held the suit property in constructive trust for the respondents as this question had been answered in
the armative by the Court of Appeal and to open this question would lead the court to delve into
matters of fact which the court does not have jurisdiction to address.
38. To them, three key facts were established by the Court of Appeal, that; there existed a relationship
of trust between the respondents and the 1st appellant; instead of using the duciary duty strictly as
a trustee, the 1st appellant unjustly enriched himself through the agreement entered into between the
appellants and the respondents; and that the 1st respondent remains the true and benecial owner and
as such, the suit property and shares in the 4th -7th respondents were held in trust for the 1st respondent.
39. They argue that a constructive trust overrides the registered title where a party has exerted undue
inuence when obtaining and retaining the property transferred to him, as is the circumstances in the
instant case. Furthermore, section 25 (2) of the Land Registration Act provides that overriding interests
such as a trust, can be imposed to defeat the title of a registered proprietor.
40. On whether shares acquired on the basis of a duciary duty can be enforced by the letter of the law
defeating the interests of the equitable owner, they submit that the Court of Appeal established as a
matter of fact that the shareholding held by the 1st and 3rd appellants in the 4th - 7th appellants was in
trust for the respondents. They rely on the Court of Appeal’s decision in Salesio M’tonga v M’ithara
& 3 others [2015] eKLR to support this assertion. In conclusion, they urge the court to give eect to
the principles of equity and in particular the doctrine of constructive trusts and dismiss the appeal for
want of merit.
b. The 3rd and 4th respondents

41. The 3rd and 4th respondents led grounds of objection dated November 17, 2022 contending that the
petition raises questions of facts outside the scope of the two questions restricted by the certication
given on July 8, 2022. They also led a notice of preliminary objection dated November 24, 2022
challenging the court’s jurisdiction to entertain the Petition of appeal as it is fatally defective and invalid
for, it does not set out the summary of the grounds for the petition and that the record of appeal does
not comply with rule 40 (1) (d) of the Supreme Court Rules.
42. In support of their case, the 3rd and 4th respondents led submissions dated May 16, 2023 2022. On
jurisdiction, they submit that this court does not have jurisdiction to revisit the factual ndings of
the superior court. To buttress this assertion, they rely on this court’s decision in Dina Management
Limited v County Government of Mombasa & 5 others (SC Petition 8 (E010) of 2021) [2023] KESC
30 (KLR) (21 April 2023) (Judgment) and Mitu-Bell Welfare Society v Kenya Airports Authority &
2 others; Initiative for Strategic Litigation in Africa (Amicus Curiae) (SC Petition 3 of 2018) [2021]
KESC 34 (KLR) (11 January 2021) (Judgment).
43. On the identity of parties, they argue that the 3rd to 8th appellant companies are mere corporate veils of
the 1st and 2nd appellants. Therefore, the 3rd to 8th appellants are crucial to this dispute since they stood
in a duciary relationship with the 1st, 2nd, and the 3rd respondents as nancial advisors.
44. On whether a constructive trust can be imported into a land sale agreement to defeat a registered title
resulting therefrom, they urge that equity will impose a constructive trust in an agreement for the sale
of land and the resultant registration, whenever it is shown that the claimant obtained the agreement
and title while standing as a duciary irrespective of whether he breached the duciary duties or not.
In addition, they contend that equity absolutely prohibits duciaries from becoming purchasers and
that the principle dictates that a trustee may not place himself in a position where his duty and his
interest may conict. They further argue that equity goes beyond the agreement of sale/conveyance to
investigate whether the duciary used unlawful means such as undue inuence to create the intention/
consent on the part of the advisee to enter into the agreement. They cite the decision in Royal Bank
of Scotland vs Etridge (No 2) (2002) AC 773 and MacDonald v Creelman (1988), 83 N.S.R (2d) 415
to support this contention.
45. On the importation of a constructive trust into a shareholding of a company so as to disentitle a

registered holder of shares in a company obtained for valuable consideration, they submit that shares
in a company are property like any other. Therefore, a constructive trust applies against persons who
acquire title by breach of duciary duties, undue inuence and other wrong doings. This would apply
equally to shareholding agreements and the registration as holder of shares in a company. They cite
Kane v Radley [1999] CH 274 and Neville v Wilson [1996] 3 All E.R 171 (CA) to support this
assertion.
b. The 5th & 6th Respondents’ Case

46. Similarly, the 5th and 6th respondents led grounds of objection dated November 17, 2022 reiterating
the 1st to the 4th respondents’ contention, adding that the petition neither discloses nor establishes
any special circumstances or basis to justify a departure from the established principles of constructive
trust.
47. The 5th and 6th respondents reiterate the 1st to the 4th respondents’ submission on the issue of undue
inuence and the jurisdiction of the court and submit that the petition as framed renders it dicult
for the court to grant the prayers sought and urge the court to dismiss it.
C. Issues for Determination

48. In our ruling of July 8, 2022, we certied the appeal as one involving matters of general public
importance under article 164(4)(b) of the Constitution. In the said ruling, we agreed with the appellants
that the issue whether it is open to the court to imply and import the doctrine of trust into land sale
transactions and into shareholding of a company as to disentitle a registered holder of land or shares
obtained for valuable consideration, without oending the constitutional right to property under
article 40 of the Constitution and other statutory provisions, is an issue that required the input of this
court. We thus certied the appeal as one deserving our attention but limited to the two issues only.
49. The jurisdiction of the court has, however, been put to question. The 3rd and 4th respondents led a
preliminary objection dated November 24, 2022 on the grounds that this court lacks jurisdiction to
entertain the petition of appeal as it is fatally defective, for the reason that it does not comply with rule
10 of the Court of Appeal Rules, rule 39(1)(b) and (e), 40(1)(d) and Form G of the Supreme Court Rules
and rule 11 of the Supreme Court (General) Practice Directions, 2020. They also object to the court’s
jurisdiction, just like the 1st and 2nd respondents, for the appeal raising questions of fact beyond that
which was certied as involving general public importance.
50. We have held in several of our decisions that jurisdiction is a preliminary issue and ought to be dealt with
in limine. Where a court nds that it does not have jurisdiction, it ought to down its tools. Therefore,
with the jurisdictional challenge raised by the respondents as against the appeal, it is imperative that the
same be determined upfront. Taking this into consideration, our Ruling of July 8, 2022, the parties’
respective cases, submissions, and the remedies sought, the issues that arise for determination before
this court are:
i. Whether the petition satises the jurisdictional threshold under article 163(4)(b) as read with
section 15 of the Supreme Court Act;
ii. Whether a constructive trust can be imported into a land sale agreement to defeat a registered
title therefrom; and
iii. Whether a constructive trust can be imported into a shareholding of a company as to disentitle
a registered holder of shares in a company obtained for valuable consideration.
C. Analysis And Determination
i. Whether the petition satises the jurisdictional threshold under article 163(4)(b) as read with
section 15 of the Supreme Court Act
51. There is a two-fold challenge on the court’s jurisdiction. The rst angle of the challenge is on non-
conformity of the petition with the rules and the second angle is on the contents of the petition.
52. The 3rd and 4th respondents’ preliminary objection is premised on the grounds that the Notice of
Appeal; is not in compliance with Rule 10 of the Court of Appeal Rules as the same is not signed
and endorsed with the stamp of the Deputy Registrar; it does not relate to the judgment delivered
on April 4, 2019 but is led in the application for certication and leave to appeal to the Supreme
Court; is contrary to rule 39(1)(b), (c) and Form G of the Supreme Court Rules and does not set out
the concise presentation of arguments supporting each of the grounds of the petition of appeal, thus
it occasions prejudice to the respondents’ rights to a fair trial. The 3rd and 4th respondents further posit
that the Record of Appeal does not comply with rule 40(1)(d) of the Supreme Court Rules as it has not
included the relevant pleadings and documents required to determine the appeal, in omitting some
documents from the Record; and it does not comply with rule 11 of the Supreme Court (General)
Practice Directions, 2020 of November 16, 2020 as the 10th line of each document is not numbered.
53. We note that in the 3rd and 4th respondents’ notice of motion Application dated December 2, 2022 is
raised similar grounds in urging this court to strike out the record of appeal. In our ruling of April 21,
2023 we addressed these grounds conclusively and we were satised, as we still are, that the notice of
appeal was properly led before the Court of Appeal. Our perusal of the said notice of appeal reveals
that whereas the heading of the notice of appeal indicates that it is led in regard to an application for
grant of certication and leave to appeal to the Supreme Court, its contents specify the intent to appeal
against the decision of the Court of Appeal rendered on April 4, 2019. The parties having engaged in
the certication and leave to appeal proceedings both at the Court of Appeal and before us, there was
little doubt left as to the appellants’ intention to appeal against the judgment of the Court of Appeal.
54. In addressing the 3rd and 4th respondents’ argument on non-compliance with rule 10 of the Court of
Appeal Rules, we reiterate, as we stated in our ruling, that it is not for this Court to entangle itself in
the ling and administrative processes of the Court of Appeal. We armed that the failure to have it
stamped or endorsed by the Court of Appeal was not fatal, as the Notice of Appeal was duly lodged
in the Court of Appeal.
55. On the lack of compliance with rule 40(1)(d) of the Supreme Court Rules, this being a matter of
determination of specic framed questions of general public importance, the documents stated as
missing from the record would be useful for the interrogation of ndings of facts which falls outside
the purview of this court.
56. Concerning the failure by the appellants to mark every tenth line of the document, we nd, without
condoning the same, that this is also not fatal. Article 159 (2) (d) of the Constitution obliges this court
to administer justice without undue regard to procedural technicalities. We therefore nd that the 3rd
and 4th respondents’ preliminary objection dated November 24, 2022 has no merit and is dismissed.
57. The second limb of the respondents’ objection is that the petition of appeal as framed goes beyond the
scope of the questions certied as matters of general public importance. The 1st and 2nd respondents
urge that the court’s jurisdiction can only be exercised with regard to the two framed issues. They
submit that, while the appellants raise seven grounds of appeal, ve of them raise matters of fact
contrary to the jurisdiction of the court. Similarly, the 3rd and 4th respondents urge the court to decline
the invitation to consider and nd alleged errors of fact by the Court of Appeal, as that falls outside the
scope of the two framed questions. The 5th and 6th respondents also urge that by virtue of this court
having a limited scope and jurisdiction as set out in the ruling of July 8, 2022, it cannot grant reliefs
(b), (c), (d), and (e) of the petition of appeal as they are ultra vires.
58. In response, the appellants underscore that the Court can choose which set of facts to address, where
the facts as summarized by the High Court dier from those of the Court of Appeal. Moreover, that
section 20 of the Supreme Court Act and rule 26(3) of the Supreme Court Rules, 2020 empower the
Court to consider facts including taking new evidence not previously available, re-appraise evidence
and draw inferences of facts. They also cite section 3A of the Supreme Court Act to urge that the Court
has wide powers to make such orders as may be necessary for the administration of justice.
59. In Samuel Kamau Macharia & another v Kenya Commercial Bank Limited & 2 others SC Appl. No 2
of 2011 [2012] eKLR we held that an appeal is granted in specic terms by the Constitution or statute.
An appeal thus typically lies to a higher court and entails a reconsideration of a decision by the higher
court with a view to reversing it either in part or in toto.
60. The appellate jurisdiction of this court derives from article 163(4) of the Constitution. This involves an
appeal as of right or an appeal on certication. As held in Fahim Yasin Twaha v Timamy Issa Abdalla
& 2 others SC Civil Appl No 35 of 2014 [2015] eKLR, the court cannot exercise both jurisdictions
concurrently. The litigant chooses the best path upon which the matter is considered within the
established threshold. Unlike an appeal as of right where the court exercises its appellate jurisdiction
on the application and interpretation of the constitution by the superior courts below, the jurisdiction
on certication is narrower as the court is only called upon to express its position on matters that
transcend the litigants before court among other parameters set out in Hermanus Phillipus Steyn v
Giovanni Gnecchi-Ruscone SC Application No 4 of 2012 [2103] eKLR without necessarily sitting on
appeal between the parties before it. This stems from the holding in Daniel Kimani Njihia v Francis
Mwangi Kimani & another SC Appl No 3 of 2014 [2015] eKLR that the Supreme Court is not just
another appellate layer of courts to oer remedy to parties dissatised with the decisions of the Court
of Appeal.
61. Further, in Dhanjal Investments Limited v Kenindia Assurance Company Limited Sup Ct. Petition
No.7 of 2016 [2018] eKLR, we appreciated that the court may allow parties to submit on an issue not
previously framed as one for determination but which, even if unconnected to any of the framed issue,
is nonetheless important in resolving a dispute before it. The ‘public importance’ criteria should in any
event never be lost. We stated as follows in that regard:
“ (67) Having so stated, we must at this point remind parties that it is only the issues
that are certied as being of great public importance that must form the basis
for submissions and ultimately the decision of this court. To frame certain
issues as being of great public importance at the point of certication under
article 163(4)(b) of the Constitution and then submit on issues that are specic
to the parties at hand with no public element exhibited is an abuse of court
process and may lead to the dismissal of an appeal.”
62. As noted in the above cited case, it will always be a matter for the exercise of discretion whether to allow
a point in no way connected with the certied point of law to be argued on the appeal, and it is not to
be assumed that an appellant can as a matter of right raise any such point. In framing the two questions
that we certied as being of great public importance, we observed as follows:
“13. … We think that the dispute did not end with the vitiation of contracts or the law on the
circumstances of resulting or constructive trusts and the lifting of the corporate veil which
we agree are settled issues. The crux of the applicants’ case in their fteen grounds, as we
understand it, is the ultimate recourse granted by the courts under such instances in view of
the existing constitutional and statutory provisions ” (Emphasis ours)
We are therefore mindful of our exercise of discretion and nd no merit in the objection to our
jurisdiction as sought in the objection and the application to strike out the appeal. None of the issues
raised to challenge our jurisdiction suces. We disallow the preliminary objection and the application
by the respondents and now turn to determine the issues as framed.
ii. Whether a constructive trust can be imported into a land sale agreement to defeat a registered
title therefrom
63. The appellant faults the Court of Appeal for holding that the agreement for sale dated August 31,
2005 between the 8th appellant and the 1st respondent did not represent the will of the parties. They
state that this overrode the established principles of section 3 of the Law of Contract Act; section 97(1)
of the Evidence Act; and sections 36,41,43 and 44 of the Land Registration Act as a written contract
for disposing interest in land or a written contract cannot be unilaterally amended by parole evidence.
They dispute the importation of constructive trust and maintain that parties had a common intention,
which was not to establish the 1st appellant or any of the appellants as a duciary. We however note that
the appellants failed to address us on the specic issue framed for determination, save to regurgitate the
factual background and litigation history before the superior courts.
64. On the other hand, the respondents submit that a constructive trust overrides the registered title where
a party has exerted undue inuence when obtaining and retaining the property transferred to him, as
was in the instant case. Furthermore, section 25 (2) of the Land Registration Act provides for overriding
interests, which include trusts, which can be imposed to defeat the title of a registered proprietor.
The respondents further urge that, equity will impose a constructive trust in an agreement for the sale
of land and the resultant registration whenever it is shown that the claimant obtained the agreement
and title while standing as a duciary, irrespective of whether he breached the duciary duties. They
add that the petition neither discloses nor establishes any special circumstances or basis to justify a
departure from the established principles of constructive trust.
65. The Court of Appeal having considered the pleadings, and appraised itself of the evidence within the
connes of its jurisdiction, established that the respondents had placed their trust in the 1st appellant to
salvage the suit properties. In examining the transactions, it found that the circumstances gave rise to a
presumption of undue inuence on the part of the 1st respondent and met the criteria of being regarded
as unconscionable bargains. It therefore found that the 1st and 3rd appellants hold the shareholding of
the 4th -7th appellant companies in trust for the 1st respondent, and the 4th appellant holds the suit land
in trust for the 1st respondent.
66. The Trustee Act, cap 167 Laws of Kenya denes a “trust” and “trustee” as extending to implied and
constructive trusts. The Black’s Law Dictionary, 9th edition denes a trust as:
“ The right, enforceable solely in equity, to the benecial enjoyment of property to which
another holds legal title; a property interest held by one person (trustee) at the request of
another (settlor) for the benet of a third party (beneciary).”
67. It further denes a constructive trust at pg 1649 as:
“ An equitable remedy that a court imposes against one who has obtained property by wrong
doing.
68. Halsbury’s Laws of England, 4th edition, volume 48 at paragraph 690 states as follows on constructive
trusts:
“A constructive trust will arise in connection with the legal title to property whenever one
party has so conducted himself that it would be inequitable to allow him to deny to the
other party a benecial interest in the property acquired. This will be so where: (1) there was
a common intention that both parties should have a benecial interest; and (2) the claimant
has acted to his detriment in the belief that by so acting he was acquiring a benecial interest.
The relevant intention of each party is the intention reasonably understood by the other
party to be manifested by that party’s words or conduct notwithstanding that he did not
consciously formulate that intention or even acted with some dierent intention which he
did not communicate.
The rst question is whether, independently of any inference to be drawn from the conduct
of the parties in the course of sharing the property, there has at any time prior to acquisition,
or exceptionally at some later date, been any agreement, arrangement or understanding
reached between them that the property is to be shared benecially. Such an agreement will
be conclusive.
Where the evidence is that the matter was not discussed at all, the court may infer a common
intention that the property was to be shared benecially from the conduct of the parties.
In this situation direct contributions to the purchase price by the party who is not the legal
owner, whether initially, or by way of mortgage instalment, will readily justify the inference
necessary to the creation of a constructive trust.
Exceptionally the agreement, arrangement or understanding may be arrived at after the date
of the original acquisition. Once common intention has been established, whether by direct
evidence of common agreement or by inference from conduct, the claimant must show that
he acted to his detriment in reliance on the agreement.
The nal question to determine is the extent of the respective benecial interests. If the
parties have reached agreement, this is conclusive. Where there is no agreement as to the
extent of the interest, each is entitled to the share the court considers fair having regard to
the whole course of dealing between the parties in relation to the property.”
69. A constructive trust is thus an equitable instrument which serves the purpose of preventing unjust
enrichment. The Canadian Supreme Court in Soulos v Korkontzilas, [1997] 2 SCR 217, a case which
involved a land dispute stated as follows, as to the purpose of constructive trust:
“ The constructive trust is an ancient and eclectic institution imposed by law not only to
remedy unjust enrichment, but to hold persons in dierent situations to high standards of
trust and probity and prevent them from retaining property which in “good conscience”
they should not be permitted to retain. While Canadian courts in recent decades have
developed the constructive trust as a remedy for unjust enrichment, this should not be
taken as expunging from Canadian law the constructive trust in other circumstances where
its availability has long been recognized. Under the broad umbrella of good conscience,
constructive trusts are recognized both for wrongful acts like fraud and breach of duty of
loyalty, and to remedy unjust enrichment and corresponding deprivation. While cases often
involve both a wrongful act and unjust enrichment, constructive trusts may be imposed on
either ground.”
70. Similarly, although in a matrimonial property dispute, the Canadian Supreme Court in Murdoch v
Murdoch [1975] 1 SCR 423 stated as follows:
“As is pointed out by Scott, Law of Trusts, 3rd ed., 1967, vol. 5, at p. 3215, “a constructive
trust is imposed where a person holding title to property is subject to an equitable duty to
convey it to another on the ground that he would be unjustly enriched if he were permitted
to retain it ... The basis of the constructive trust is the unjust enrichment which would
result if the person having the property were permitted to retain it. Ordinarily, a constructive
trust arises without regard to the intention of the person who transferred the property”;
and, again, at p. 3413, quoting Judge Cardozo “a constructive trust is the formula through
which the conscience of equity nds expression. When property has been acquired in
such circumstances that the holder of the legal title may not in good conscience retain the
benecial interest, equity converts him into a trustee.”
71. The United States Supreme Court in Harris Tr & Sav Bank v Salomon Smith Barney Inc, 530 US 238,
250–51 (2000) citing Moore v Crawford, 130 US 122, 128 (1889) stated thus:
“ Whenever the legal title to property is obtained through means or under circumstances
‘which render it unconscientious for the holder of legal title to retain and enjoy the benecial
interest, equity impresses a constructive trust on the property thus acquired in favor of the
one who is truly and equitably entitled to the same..”
72. As has been established therefore, trusts are created either expressly, where the trust property, its
purpose and the beneciaries are clearly stated, or established by the operation of the law. Like in the
instant case, where it is not expressly stated, the trust may be established by operation of the law.
73. From the denitions above, we establish that a constructive trust is a right traceable from the doctrines
of equity. It arises in connection with the legal title to property when a party conducts himself in a
manner to deny the other party benecial interest in the property acquired. A constructive trust will
thus automatically arise where a person who is already a trustee takes advantage of his position for his
own benet.
74. Vide section 3(1) of the Judicature Act, cap 8 Laws of Kenya, the doctrines of equity are applicable in
Kenya and form part of our laws. It states that common law, doctrines of equity and statutes of general
application shall apply in so far as the circumstances of Kenya and its inhabitants permit and subject
to such qualications as those circumstances may render necessary.
75. In addition, we also note that the concept of trust is not new in our jurisdiction. In Isack M’inanga
Kiebia v Isaaya Theuri M’lintari & another Petition 10 of 2015 [2018] eKLR, we observed that the
courts, vide section 163 of the Registered Land Act (repealed by the Land Registration Act No 3 of
2012) have been more willing to import the doctrines of implied, resulting and constructive trust as
known in English law, into section 28 of the Act.
76. The concept of constructive trust has also been inferred in a number of decisions of the superior courts.
The Court of Appeal in Twalib Hatayan & another v Said Saggar Ahmed Al-Heidy & 5 others, Civil
Appeal No 51 of 2014 [2015] eKLR held that:
“ A constructive trust will thus automatically arise where a person who is already a trustee
takes advantage of his position for his own benet (see. Halsbury’s Laws of England
supra at para1453). As earlier stated, with constructive trusts, proof of parties’ intention is
immaterial; for the trust will nonetheless be imposed by the law for the benet of the settlor.
Imposition of a constructive trust is thus meant to guard against unjust enrichment.”
77. In Macharia Mwangi Maina & 87 others v Davidson Mwangi Kagiri Civil Appeal No 6 of 2011,
consolidated with No 26 & 27 of 2011 [2014] eKLR and in Willy Kimutai Kitilit v Michael Kibet,
Civil Appeal No 51 of 2015 [2018] eKLR, the Court of Appeal, in matters involving the sale of land,
held that the equitable doctrines of constructive trust and proprietary estoppel are applicable and
enforceable to land, subject to the circumstances of the case.
78. The applicability of the doctrine of constructive trust is therefore now settled within our jurisdiction
and is applied to land sale transactions. In our ruling
reviewing the Court of Appeal decision on certication, we underscored the fact that the constructive
trust is already settled. We stated thus:
“13. We think that the dispute did not end with the vitiation of contracts or the law on the
circumstances of resulting or constructive trusts and the lifting of the corporate veil which
we agree are settled issues. The crux of the applicants’ case in their fteen grounds, as we
understand it, is the ultimate recourse granted by the courts under such instances in view of
the existing constitutional and statutory provisions. …” (Emphasis ours)
The rst question before us therefore is not whether the Court of Appeal was correct in imputing a
constructive trust but rather, whether such trust can be imported into a land sale agreement to defeat
a registered title therefrom obtained for valuable consideration without oending the constitutional
right to property under article 40 of the Constitution and other statutory provisions.
79. By virtue of article 40 of the Constitution, every person either individually or in association with others,
has the right to acquire and own property of any description, and in any part of Kenya. This right
to property is however not absolute. Under article 40(3) the State may deprive a person of property
through a process of acquisition of land for a public purpose or in public interest in accordance with the
Constitution. Further, under article 40(6) the rights under this Article do not extend to any property
that has been found to have been unlawfully acquired.
80. While article 40 has an internal limitation on the right to property, the general limitation of rights
provision at article 24 of the Constitution provides that any limitation on a right shall be by law, and only
to the extent that the limitation is reasonable and justiable, in an open and democratic society based
on human dignity, equality and freedom. Other relevant factors to be taken into account include the
nature of the right, the importance and purpose of the limitation, and relation between the limitation
and the purpose of such limitation. It further, provides that the person seeking to justify a particular
limitation has the obligation to justify the limitation.
81. As prescribed, a limitation of a fundamental right or freedom, must be provided under law. It is
therefore imperative for us to examine legislation making provision for the registration of titles and the
limitations on the right to property set out.
82. The Land Registration Act, No 3 of 2012, is the law that governs registration of titles. Section 25 of the
Land Registration Act provides that the rights of a proprietor shall not be liable to be defeated except as
provided under the Act, subject to encumbrances and conditions in the register; and to such liabilities,
rights and interests declared by section 28 not to require noting on the register, unless the contrary is
expressed in the register. Additionally, as is stipulated under section 25(2) nothing in this provision
shall be taken to relieve a proprietor from any duty or obligation to which the person is subject as a
trustee.
83. Under section 26 of the Land Registration Act, No 3 of 2012, a Certicate of Title issued by the
Registrar upon registration or to a purchaser of land upon transfer or transmission by the proprietor
shall be taken by all courts as prima facie evidence that the person named as proprietor of the land is the
absolute and indefeasible owner. However, this is subject to the encumbrances, easements, restrictions
and conditions contained or endorsed in the certicate. Further, the title of the proprietor shall not be
subject to challenge except on the ground of fraud or misrepresentation and where the certicate of
title was acquired illegally, un- procedurally or through a corrupt scheme.
84. Section 28 provides that unless the contrary is expressed in the register, all registered land shall be
subject to overriding interests as may for the time being subsist and aect the same, without being
noted in the register. These overriding interests include, trusts.
85. While sections 25, 26 and 28 of the Land Registration Act recognize that the rights of a registered
proprietor of land are absolute and indefeasible, these are only subject to rights and encumbrances
noted in the register and overriding interests. The overriding interests include trusts. In our view, and in
the absence of any limitation as to the trusts, this includes constructive trusts. Applying the provisions
of article 24 of the Constitution therefore, the limitation of the right to property is provided under law,
and includes a constructive trust.
86. We have found that the doctrines of equity are part of our laws by virtue of section 3 of the Judicature
Act. And while the Constitution entitles every person to the right to property at article 40, this right is
not absolute. Article 24 provides that a right cannot be limited except by law. We have also established
that, while sections 25 and 26 of the Land Registration Act provide for the rights of a proprietor
and that the certicate of title is conclusive evidence of proprietorship, section 28 provides that the
registration is subject to overriding interests. One of these overriding interests is trust, which includes
constructive trust.
87. We have also established that constructive trusts can arise in various circumstances, including in land
sale agreements. Trust is an equitable remedy which is an intervention against unconscionable conduct.
Where the circumstances of the case are such that it would demand that equity treats the legal owner
as a trustee, the law will impose a trust. It is imposed by law whenever justice and good conscience
require it. On this issue and for the reasons given above, we therefore nd that a constructive trust can
be imported into a land sale agreement to defeat a registered title.
iii. Whether a constructive trust can be imported into a shareholding of a company as to disentitle a
88. The appellants urge that a constructive trust cannot be declared against a shareholder for valuable
consideration, and that in any event, the remedy against a shareholder who has not fully paid a
valuable consideration for his shares is a call- up for payment by the innocent shareholders. They posit
that the appropriate remedies for non-payment of share value by a shareholder was set out in the
Companies Act and within the Articles of Association of the various companies. They further contend
that shareholding itself, being a contractual matter between shareholders, a declaration of trust in the
circumstances amounted to deprivation of the 1st, 2nd and 3rd appellants’ right to property under article
40 of the Constitution. They maintain that a trust did not arise as the shareholding was a product of
negotiations and was spelt out in the Memorandum and Articles.
89. The respondents on the other hand submit that shares in a company are property like any other.
Constructive trust therefore applies to shareholding agreements and the registration as holders of
shares in a company, against persons who acquire title by breach of duciary duties, undue inuence
and other wrong doings. They submit that it is not in dispute that the 4th to 7th appellants were special
purpose vehicles created to salvage the 1st respondent from nancial distress. The constructive trust
therefore stepped in as an equitable concept to prevent the appellants from acting in an unconscionable
manner defeating the common intention.
90. The respondents further urge that the appellants never paid any consideration for the shares they seek
to enforce. They cannot therefore rely on the letter of the law to enforce the ownership of shares when
at all material times, the intention of the parties was to create a trust to aid in the restructuring of the 1st
respondent. They thus submit that the issue at hand must be answered armatively, as the global stance
is that a constructive trust can be imported into a shareholding agreement to disentitle a registered
shareholder.
91. The Companies Act, No 17 of 2015, makes provision to govern all types of companies. Section 20 of
the Act provides for the articles of association as the Constitution of the company. Pursuant to section
26 of the Act, for existing companies before the commencement of the Act, such as the companies
in the instant suit, the memorandum of association is treated as provisions of the articles. Companies
therefore have a free hand in managing their own aairs through these constitutive documents. As
provided under section 30(1) of the Act, the company’s constitution binds the company and its
members to the same extent as if the company and its members had covenanted, agreed with each other
to observe the constitution. Further, within our jurisdiction and outside, it has been held that a court
cannot interfere with the internal aairs of a company except for limited circumstances. In Martin
Lemaiyan Mokoosio & another v Reshma Praful Chandra Vadera & 3 others [2021] eKLR, Odunga
J (as he then was) held as follows:
“13. Whereas disputes regarding internal aairs of a company ought to be resolved in accordance
with the constitution of the company, where it was alleged that the company was not acting in
accordance with its own constitution, the court had the power to intervene. In the instant case
the allegations were that the respondents had violated the constitution of the company and
therefore the court was entitled to intervene.”
In Tanui & 4 others v Birech & 11 others [1991] KLR, the Court of Appeal expressed itself in the
following terms:
“ …We would agree that while it is not the business of the High Court or this court to involve
itself in the day to day running of institutions such as the church, colleges, clubs and so
on, yet where it is shown that such an organization is conducting its aairs in a manner
contrary to its constitution and to the detriment of its members, then the High Court and
this court would not only be entitled to but under a duty to compel it, either, by injunction
or otherwise, to obey its constitution.”
92. It is important to note that section 93 of the Act requires the company to keep a register of its members
including information relating to benecial owners of the company, if any. Section 104 however
provides that:
104. Trusts not to be entered on register
1. A company shall not accept, and shall not enter in its register of members, notice of
any trust, expressed, implied or constructive.
2. If a company contravenes subsection (1), the company, and each ocer of the company
who is in default, commit an oence and on conviction are each liable to a ne not
exceeding ve hundred thousand shillings.
Section 104(1) was similarly contained in section 119 of the repealed Companies Act cap 486 which
provided that: “No notice of any trust, expressed, implied or constructive, shall be entered on the
register, or be receivable by the registrar”.
93. Further, section 105 of the Act states that until the contrary is proved, the register of the members of
a company is evidence of the matters required or authorised to be included in it. It is therefore evident
from the statutory provision that the Act expressly provides that there can be no entry of a trust on
the company register.
94. We have found that a constructive trust can arise and be imported into a land sale agreement to defeat
a registered title, and established that the constructive trust is imposed on property in the hands of a
wrongdoer to prevent him or her from benetting unjustly from the wrongful conduct. Constructive
trust is therefore an appropriate remedy for a wronged party and has a right to the proceeds.
95. We however note that section 104(1) of the Companies Act, and section 119 of the repealed Companies
Act cap 486, which is similar to section 126 of the Companies Act 2006 of the United Kingdom provides
that:
126. Trusts not to be entered on register

No notice of any trust, expressed, implied or constructive, shall be entered on the register of
members of a company registered in England and Wales or Northern Ireland, or be receivable
by the registrar.
96. In commenting on this provision, Palmer’s Company Law Manual observes as follows:
“ There is nothing to prevent trustees from becoming members of a company but the CA
1985, S.360 provides that no notice of any trust – express, implied or constructive – may
be entered on the register of any company registered in England and Wales. The rationale
behind the rule (which does not apply in Scotland) is that the relationship between trustee
and beneciary is of no concern to the company which should be entitled to assume that it
can deal solely with the registered holders.”
97. In Farouk Ravate & another v Eric Agbeko & 2 others; Ravasam Development Company Limited
(interested parties) HCCC No 450 of 2011 (Consolidated with No. 476 of 2015 and No. 637 of
2015) [2020] eKLR, Tuiyott J (as he then was) stated as follows while noting the observations made
in commentaries on the eect of section 119 of the repealed Companies Act:
“40 …Nothing in the three passages I have set out suggests that the eect of this provision is to
outlaw or bar trust arrangements in regard to shares in a company. Quite to the contrary, it
recognizes that they may exist but that rights of the beneciaries as against the Company (and
perhaps against third parties as I shall be proposing) are circumscribed because no notice of
such Trust is to be entered in the register of members.
In all these cases (in English law, but not in Scots Law) the trustee as registered holder will be
personally responsible for all matters and liabilities arising in respect of the shares although he
will in turn be entitled to an indemnity from the beneciaries. An English company’s rights as
against the trustee are not therefore limited to the trust property”.
98. We do agree that whereas section 104 of the Companies Act proscribes the entry of trusts on the
register of members, the intention of this provision was not to bar any trust arrangements, and we add,
including constructive trusts. There is therefore no bar to the holding of share(s) upon a trust. As the
court stated in the case above, which we agree with:
“ The fact that a company does not recognize a person holding a share upon a trust and treats
a registered shareholder as the absolute owner of his shares does not mean that it does not
allow its members to enter trust relationships. As a corollary it does not mean that a trust
arrangement is not enforceable as between the contracting parties.”
99. In the present case, the Court of Appeal having established that there was unconscionable or
inequitable behaviour, trust was imposed as the most appropriate remedy, and we are in total agreement
thereto. In answering the question before us and taking into account the cited provisions of the
Companies Act, whether a constructive trust can be imported into a shareholding of a company, our
answer is in the armative. We have established that, section 104 does not outlaw or bar importation of
trust into the shareholding of a company. Further, the Black’s Law Dictionary, 11th edition at page 1654
denes a shareholder as an individual who owns or holds a share or shares in a company. A shareholding
therefore signies proprietorship in a company to the extent of the share(s) held. Consequently, in this
regard, company shares constitute property under article 260 of the Constitution and therefore, where
it is found that there was a wrong doing, then a constructive trust may be inferred, and we nd that the
Court of Appeal, after considering the totality of the circumstances in the case, was right in nding
that a constructive trust had clearly been created.
iv. What reliefs should this Court grant?

100. The appellants have urged that we allow the petition of appeal, set aside the order of the Court of
Appeal and reinstate the decision of the High Court in Mombasa Civil Case No. 9 of 2011, and in
the alternative substitute it with the court’s own decision. The respondents submitted that by virtue
of this court having a limited scope and jurisdiction as set out in the ruling of July 8, 2022, it cannot
grant reliefs (b), (c), (d), and (e) of the petition as they are ultra vires the court’s powers.
101. The Court of Appeal determined that the shares held by the 1st and the 3rd respondents in the 4th to
the 7th appellants are held in trust for the 1st respondent or its nominees having determined that the 1st
appellant had set out in a scheme to purchase the property at a paltry Kshs 27,000,000/- thus unjustly
enriching himself; he was conicted between his duties as a trustee and his scheme to purchase the
property; and notwithstanding the trust relationship, the 1st appellant did not utilize any of his personal
funds to purchase the property. It found that the actions of the 1st appellant were irregular, deceitful,
in breach of his trust obligations and resulted in his unjust enrichment. We uphold these ndings.
102. A party was wronged, another has benetted as a result of the wrongdoing. It clings on section 104
of the Companies Act to state that there can be no entry of a trust on the company register. To rectify
the unjust enrichment, breach of duciary duty and right the wrong doing committed against the
respondents, the Court of Appeal found that there was a constructive trust to remedy the wrong.
We have noted that the Companies Act, however, bars the registration of any trust, expressed, implied
or constructive in its register of members. It further provides for a hefty ne for any person who
contravenes this provision. In our view, this statutory provision needs to be relooked at noting that
there are circumstances that may give rise to a constructive trust, or other kind of trust in companies,
and which require that trusts related to companies be disclosed for reasons of rule of law, accountability
and good sense of justice.
103. Having set out our parameters in this appeal, and noting that our focus is on the recourse, rather than
the applicability of the doctrine of trust, we are not persuaded to re-open the merits of the Court
of Appeal decision in concluding the applicability of the trust. Litigation has to come to an end and
the Court of Appeal, having satised itself of the facts, came to one conclusion and made its orders.
As expected, a decision arising out of adversarial litigation is not bound to be satisfactory to both
parties and undoubtedly, dierent courts would come to dierent conclusions on the same facts. Re-
opening the facts in our view is not appropriate under circumstances, and would be going beyond our
constitutional remit if we so did. At any rate nothing has been shown to take that unconventional route.
104. A trend towards promotion of legal certainty, safeguarding of property rights, and equitable access to
justice undoubtedly emphasizes the necessity for a revision of the legislation governing the registration
of trusts (including constructive) in relation to shares held in a company. These changes would be
indicative of a growing recognition of the importance of constructive trust as a means of addressing
unjust enrichment and ensuring equitable outcomes in disputes. Legislation that is in line with
international developments and prevailing standards can enhance the strength and adaptability of
the legal system, enabling it to more eectively tackle present day issues pertaining to shareholding,
property rights and fair redress. It provides an opportunity for courts to shape the legal landscape
concerning providing clarity particularly on enforcing remedies when breaches or unfairness occur.
105. We reiterate that a constructive trust is imposed to address situations where it would be unjust for one
party to retain legal ownership of property under the unequitable circumstances. The court recognizes
that a claimant has a better right to certain property than the person who holds legal title to it, it
therefore declares a constructive trust in favour of the victim of the wrong, who is then given a right
to the property.
106. Courts are an integral part of the Kenyan judicial system, viewed as vehicles for redressing wrongs. As
a result, they are entrusted with the responsibility of adjudicating disputes and administering justice,
in accordance with the Constitution’s ethos, values and principles. In carrying out their judicial duties,
they are obligated to adhere to the principles outlined under article 159 of the Constitution. This
guarantees that the objectives and tenets of the Constitution are upheld.
iv. Costs
107. On costs, taking all the above into consideration and the nature of this matter as one involving general
public importance, our nding transcends beyond the parties before the court, and therefore we order
that each party bear their own costs.
108. In the end and in answering the two questions posed for our determination, we do nd that:
i. A constructive trust can be imported into a land sale agreement to defeat a registered title
therefrom; and
ii. A constructive trust can be imported into a shareholding of a company as to disentitle a

We are also not mindful of exercising our discretion towards disturbing the ndings of fact made by the
Court of Appeal. We however, note that there may be legal uncertainty over the recourse that parties
have upon declaration of trust by the Courts and how to actualise the same especially concerning
shareholding. While it is open to each court to have regard to the specic circumstances, we think this
is an issue that the Kenya Law Reform Commission, the Attorney General, Parliament and all the
stakeholders should give consideration whether there is need for legislative intervention.
Orders
109. Consequently, we make the following orders:
i. A constructive trust can be imported into a land sale agreement to defeat a registered title
therefrom; and
ii. A constructive trust can be imported into a shareholding of a company as to disentitle a

registered holder of shares in a company obtained for valuable consideration
iii. The appeal dated July 28, 2022 is hereby dismissed;
iv. Each party shall bear its own costs; and
v. We hereby direct that the sum of Kshs 6,000/-, deposited as security for costs upon lodging of
this appeal, be refunded to the appellant.
It is so ordered.
DATED AND DELIVERED AT NAIROBI THIS 28TH DAY OF DECEMBER, 2023.
………………………………………………………………
M. MWILU
DEPUTY CHIEF JUSTICE & VICE PRESIDENT OF THE SUPREME COURT
………………………………………………………………
S. C. WANJALA
JUSTICE OF THE SUPREME COURT
………………………………………………………………
NJOKI NDUNGU
………………………………………………………………
I. LENAOLA
………………………………………………………………
W. OUKO
I certify that this is a true copy of the original
REGISTRAR,
SUPREME COURT OF KENYA

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Shah & 7 others v Mombasa Bricks & Tiles Limited & 5 others (Petition 18

(Being an appeal from the Judgment and Orders of the Court of

d. Any other relief as the Honourable Court may deem t.

g. Punitive and aggravated damages against 3rd respondent for trespass/conversion.

ii. Court of Appeal

C. Proceedings Before The Supreme Court

a. The Petition of appeal be allowed.

i. The 1st and 2nd respondents

b. The 3rd and 4th respondents

45. On the importation of a constructive trust into a shareholding of a company so as to disentitle a

b. The 5th & 6th Respondents’ Case

C. Issues for Determination

126. Trusts not to be entered on register

iv. What reliefs should this Court grant?

ii. A constructive trust can be imported into a shareholding of a company as to disentitle a

ii. A constructive trust can be imported into a shareholding of a company as to disentitle a

iii. The appeal dated July 28, 2022 is hereby dismissed;

iv. Each party shall bear its own costs; and

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