THE DINA CASE; SUPPLEMENTING OR SUPPLANTING THE TORRENS PRINCIPLE

1. Introduction

Proprietary rights are so important that the Constitution recognizes them as a fundamental human right and directs the state to defend them. To that goal, the state has designated the Ministry of Lands as the custodian of land records.

A purchaser wishing to purchase land is expected to adhere to the principles of caveat emptor (buyer beware) as well as the principle of nemo dat non quad non habet (no one can give what they do not have). In this regard, the burden lies on the purchaser to undertake due diligence to acquire a good title. Regarding due diligence on the title, the tradition has always been that an official search at the lands office is sufficient to confirm the registered owner of the parcel. This is in agreement with the Torrens principles which provide that the purchaser’s due diligence only entails looking into the details in the register.

Nonetheless, the Supreme Court’s decision in the Dina case appears to broaden the reach of the Torrens principles by requiring one to go beyond the mirror and curtain principles. The article examines whether the Supreme Court ruling supplements or supplants the Torrens principles, which hold that an official search at the lands office is sufficient to confirm the registered owner of the property, and after purchase, confer a legal and valid title.

2. The Torrens Principle

The Torrens principles provide for the following:

1. The Mirror Principle -The register perfectly reflects the exact state in which the title exists.
2. The Curtain Principle – A potential purchaser does not need to be concerned about what is not recorded in the register.
3. Insurance/Indemnity Principle – The purchaser should be guaranteed compensation for loss arising from fraud by private persons or any errors committed by the Registrar of Lands.

The Torrens principles, taken together, provide that if a purchaser’s due diligence only entailed looking into the details in the register, without carrying out an extensive investigation of the issues underlying the title, such as its history, the purchaser would still be considered a bona fide purchaser. A bona fide purchaser is an innocent buyer who has a recourse when their title is challenged. Once their name is entered into the register of lands, this would serve as conclusive evidence of proprietorship and they would acquire an indefeasible title to the land.

     2.1 Incorporation of the Torrens Principles in the law

Both Statute and Case laws confirm that the Torrens principles are an essential part of our laws in relation to land transactions.

    2.1.1 Statute

For a long time, the Torrens principles have been integrated into Kenyan law. Section 23 of the now-repealed Registration of Titles Act stipulated that once a certificate of title was issued to a purchaser upon transfer, it is to be taken as conclusive evidence that the person is the indefeasible owner of the land. The position as laid out in Section 23 is replicated in the Land Registration Act. Section 26 of the Land Registration Act, which currently governs the system of land registration in Kenya, provides, just like Section 23, that a certificate of title should be considered conclusive proof of ownership, with the person named in the title being the absolute and indefeasible owner of the land.

     2.1.1.1 Exceptions

Section 26 of the Land Registration Act provides for two instances when the Torrens principles (mirror and curtain) will be overlooked:

1. On the ground of fraud or misrepresentation to which the person is proved to be a party; and
2. where the certificate of title has been acquired illegally, unprocedurally, or through a corrupt scheme.

The above provision was underscored in the case of Fuzi Development Limited & Others v. City Council of Kwale [2014] eKLR. The court reiterated that “a registered proprietor acquires an absolute and indefeasible title if and only if the allocation was proper and regular. The court further reiterated that it “cannot on the basis of indefeasibility of title sanction an illegality or give its seal of approval to an illegal or irregularly obtained title.”

     2.1.2 Case Law

In the case of Republic v. the Chief Land Registrar (Judicial Review No. 2 of 2022), the Environment and Land Court, applying the mirror principle, concluded that since the land registers did not mirror the true state and ownership of the land, the titles in question were not indefeasible. The court then went on to invoke the indemnity principle in suggesting that the officials who were responsible for the errors should compensate those who suffered loss.

3. The Dina Case

The Supreme Court, in the celebrated case of Dina Management Limited v County Government of Mombasa and 5 others, issued a decision that upset the Torrens principles. According to the court, to benefit from the doctrine of bona fide purchaser, one must have investigated the root of the title and determined that the first registered owner of the land acquired its title regularly.

It is no longer enough to just look at the register; one must ensure that the title they are acquiring is valid. The Court quite clearly went beyond the conditions provided in Section 26 for one to establish themselves as an indefeasible owner of land. To obtain an indefeasible title, not only should the purchaser not have illegally acquired the title, but they must also ensure that the original proprietor did not acquire the title illegally. While the decision in Dina does not invalidate Section 26, it essentially bars purchasers from relying only on their certificates of title as a defence of their proprietorship.

• Background of the Case

The petitioner in the case before the Supreme Court had bought a parcel of land whose first registered owner had illegally obtained the parcel’s title. As a result, the County Government of Mombasa later demolished the perimeter wall built on the land. The petitioner maintained that it was entitled to the land under the doctrine of bona fide purchaser since it was not a party to the irregularities. Furthermore, the petitioner had conducted due diligence which did not reveal any defects in the title. Therefore, the demolition and the subsequent repossession of the land violated its property rights. On the other hand, the respondent contended that there was no valid title that could have been transferred to the petitioner since the land was public land. Its illegal acquisition could not rob the government of the land even in light of an innocent purchaser.

• The Court’s Determination

The Supreme Court held that what was being challenged in the dispute was the root title to the land, not whether the petitioner was the proprietor according to the register. As such, the petitioner had to demonstrate the legality of the root title to prove that it had a right to the land. The respondent sufficiently proved that the first registered owner of the land, from whom the root of the title emerges, had fraudulently obtained the land. This means that the Court could not recognize the petitioner as the rightful owner of the property under the guise of the indefeasibility of title. The right to property under Article 40 of the Constitution did not extend to property that had been illicitly acquired, even if it is later transferred to an innocent purchaser.

4. Before and After Dina

• Before Dina

Before the precedent in Dina, courts in Kenya were amenable to applying the Torrens principles in their entirety. For instance, in the case of Republic v The Chief Land Registrar (Judicial Review No. 2 of 2022), the Environment and Land Court, applying the mirror principle, concluded that since the land registers did not mirror the true state and ownership of the land, the titles in question were not indefeasible. The court then went on to invoke the indemnity principle in suggesting that the officials who were responsible for the errors should compensate those who suffered loss.

• After Dina

After Dina, the Supreme Court, in the case of Torino Enterprises Limited v Attorney General, once again reiterated the need for rigorous due diligence on the part of purchasers of land. The Court looked past the Torrens principles by finding that the purchaser was not entitled to be considered an innocent purchaser, and therefore did not have rights of recourse, despite being allocated the land by the Commissioner of Lands. The purchaser could not acquire an indefeasible title to the land because the Commissioner did not have the authority in the first place to allocate the property to the purchaser (nemo dat quad non habet) as well as to the seller from whom the purchaser acquired the land.  The Court this time stated that the purchaser should have at least conducted a physical visit to the parcel of land to find out its state, that is, the person or entity that was occupying the land. The purchaser could not be deemed to be a bona fide purchaser since a simple inspection of the land, which it did not do, would have raised alarm bells as to whether it could acquire a valid title from the seller. Just like in Dina, the court rejected the notion that following the laid down procedure for the transfer of title would, on its own, entitle one to be deemed an innocent purchaser.

5. Can Purchasers Rely on the Bona fide Purchaser for Value Principle?

     a). Common Law/Prior Position

The traditional position has been that once a potential purchaser does a search of the register of lands in respect of the parcel they wish to purchase, and proceeds to purchase the land relying on the results of the search, they become a bona fide purchaser for value. An official search at the land registry preceding the purchase of the title entitled one to rely on the Bona fide Purchaser for Value Principle.

Therefore, the common law position, which persisted until Dina, was that a person would be entitled to a recourse if their title was challenged had they conducted due diligence in the form of an official search and subsequently paid the registered proprietor of the suit property to transfer title to them. An official search was sufficient for one to be considered an innocent purchaser in relation to other parties’ claims to the property’s title.

    b).Current position

The Supreme Court in the Dina Case underscored the case of Samuel Kamere v. Lands Registrar Kajiado [2015] eKLR on matters relating to bona fide purchasers. For one to be considered a bona fide purchase of land, they must satisfy the following:

1. They acquired a VALID and LEGAL title;
2. They carried out the necessary due diligence to determine the lawful owner from whom they acquired a legitimate title; and
3. They paid a valuable consideration for the purchase of the suit property.

In Dina and Torino, the Court went ahead to add the following conditions that ought to be met for one to rely on the principle of bona fide purchaser for value:

1. The purchaser must have done a historical search to find out the previous owners of the parcel of the land; and
2. The purchaser must have visited the property and found out which person(s) were in occupation of the land.

Therefore, in addition to the usual due diligence involving an official search at the lands registry, for one to be deemed an innocent purchaser worthy of a recourse, one must investigate the root of the title as well as the current occupants of the parcel in question.

6. Implications for the Torrens Principles

The decision by the Supreme Court in Dina may be viewed as supplanting or supplementing the Torrens principles.

It may be viewed as supplanting the principles because it requires those who wish to purchase land to go beyond looking at the register while doing their due diligence, failure to which a purchaser would be prevented from relying on the principle of bona fide purchaser for value. The Torrens principles on the other hand stipulate that since the register provides a mirror as to the state in which a parcel of land exists, a buyer does not need to look further, and as such, losses arising from taking the details in the register at face value should be covered by the government. The Dina case undoes the mirror and curtain principles. The register is no longer considered under the law as a perfect reflection of the state of the title and potential purchasers must go beyond looking at the register (“the curtain”) in their due diligence. In this regard, one may say that the Torrens principles have been rendered nugatory within the Kenyan legal system.

Alternatively, the Dina case may be viewed as supplementing the Torrens principles. This is because the decision does not entirely do away with the doctrine of bona fide purchaser. Instead, the decision in Dina adds some conditions, on top of the search required by the Torrens principles, for a person to be deemed a bona fide purchaser for value. Following Dina, a purchaser’s due diligence must entail not only an official search of the register but also a historical search and a physical visit to the property. The indemnity principle would still apply if a purchaser undertook all three. Furthermore, while the register no longer functions as a conclusive reflection of the state of a title, the Dina case did not interfere with the role of the register in respect of a purchaser’s due diligence. One must still do an official search of the register, but the official search is no longer enough on its own; it must be supplemented by a historical search and a physical visit to the property.

Regardless of whether the Dina case supplemented or supplanted the Torrens principles, the Case has completely redefined the law on property due diligence in Kenya and has far-reaching consequences for persons engaged in land transactions as discussed below.

7. Implications for Purchasers, Purchasers’ Advocates and Banks

Purchasers of land must now be even more vigilant in their dealings as they can no longer fall back on a certificate of official search to label themselves bona fide purchasers entitled to indemnity. In essence, proving the validity of a title is now entirely the responsibility of a purchaser. As for a purchaser’s advocate, they would also need to conduct extra due diligence beyond the official search, especially if the purchaser delegates the task of due diligence to the advocate. If the task of due diligence is delegated to an advocate, and the advocate fails to investigate the root of the title, and the purchaser subsequently suffers loss, the advocate may find themselves liable to compensate the purchaser for negligence. When it comes to banks, which often accept parcels of land as security for loans, the Dina case will probably have the long-term effect of dissuading them from creating charges over parcels of land situated in notorious locations and owned by less prominent persons. This would be out of an abundance of caution as banks would not be able to exercise their power of sale in the event of default over parcels whose titles are later found to be invalid. The Dina precedent has far-reaching consequences on all who, for one reason or another, engage in land transactions.