What is a Constructive Trust?
A constructive trust is an implied trust that courts establish when someone wrongfully obtains or holds legal property. Even if they hold legal title, they are not entitled to keep the property due to unfair conduct.
According to Halsbury’s Laws of England, 4th Edition, Volume 48 at paragraph 690:
“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 beneficial interest in the property acquired…”
This means the court may declare a constructive trust even if the person did not intend to create one, as long as their actions suggested an unfair benefit.
The Role of Constructive Trusts in Kenya
In Kenya, constructive trusts act as an equitable remedy. They arise by operation of law, not through a formal agreement. The main goal is to prevent unjust enrichment, especially when one party gains a benefit at another’s expense.
Kenyan courts often consider the conduct and intentions of the parties involved. If it would be unfair for one party to deny another a beneficial interest, courts may impose a constructive trust.
Key Judicial Interpretations
Macharia Mwangi Maina & 87 Others v Davidson Mwangi Kagiri
The Court of Appeal described a constructive trust as a concept rooted in equity. It operates on the conscience of the legal owner, preventing them from acting unfairly when there was a common intention between the parties.
The Court quoted Lord Reid in Steadman v Steadman (1976):
“…if one party stands by and lets the other incur expense on the belief that an agreement is valid, they cannot later claim it was unenforceable.”
In that case, the court protected the appellants who had purchased land and taken possession. The court found that a constructive trust existed, even though they did not hold the formal title.
Shah & 7 Others v Mombasa Bricks & Tiles Ltd & 5 Others
The Supreme Court emphasized that constructive trusts originate from the doctrines of equity. These doctrines form part of Kenyan law through section 3(1) of the Judicature Act.
The Court noted that when someone abuses their position as a trustee for personal gain, a constructive trust may arise automatically. This protects the rightful interests of the disadvantaged party.
A Recent Case Prosecuted by Wanjiku Maina & Co Advocates
Kamuthi Farmers Co-operative Society Ltd v Nairobi City County & Others
(Civil Appeal E047 of 2021)
In this case, Wanjiku Maina & Co Advocates represented Nairobi City County. The dispute involved two parcels of land initially sold by Kahawa Farmers Cooperative Society Limited to the now-defunct Nairobi City Council in the 1980s.
The Council:
- Paid for the land
- Took possession
- Developed housing and a sewer line
Later, after Kahawa Farmers went into liquidation, it transferred all its assets — including the two parcels — to Kamuthi Farmers Cooperative Society Limited.
In 1991, Kamuthi sued the Council, seeking eviction. However, the Council argued that the transfer was void, since it had already purchased and occupied the land.
Court Decisions
- In 2020, the Environment and Land Court ruled that Kahawa Farmers had held the two parcels in trust for the Council. The transfer to Kamuthi was therefore void.
- On 25th January 2025, the Court of Appeal upheld this decision. It confirmed that Nairobi City County was not a trespasser, since Kahawa Farmers had handed over possession after receiving payment.
The Court held that Kahawa Farmers held the land in trust for the Council, and that the 1989 transfer to Kamuthi Farmers was legally invalid.
Why Constructive Trusts Matter
Constructive trusts allow Kenyan courts to deliver equitable justice. They protect individuals who:
- Contribute to a property
- Enter into agreements in good faith
- Lack legal title but have a beneficial interest
Courts base their decisions on fairness, intention, and conduct, not just ownership documents. This makes constructive trusts a powerful tool in resolving property and fiduciary disputes.
Conclusion
The doctrine of constructive trust plays a vital role in ensuring fairness in Kenyan property law. It prevents parties from abusing legal ownership at the expense of those with genuine equitable claims. As demonstrated in Kamuthi Farmers Co-operative Society Ltd v Nairobi City County, courts in Kenya continue to uphold this doctrine to protect rightful interests, even in complex land matters.
If you believe you have a legal claim involving property, trust relationships, or unjust enrichment, contact Wanjiku Maina & Co. Advocates for expert legal guidance.
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