1. I have considered the Notice of Motion Application dated 20th December 2023 together with the affidavit in support sworn on even date; the further affidavit sworn on 13th February 2024 and the replying affidavit dated 15th January 2024 sworn in opposition to the same, the submissions of the parties and the applicable law.
2. The Applicant has not denied that the parties entered into a hire purchase agreement dated 26th September 2018 (“the Agreement”) by which the plaintiff acquired machinery for purposes of its road construction business.
3. Further to the above, the Defendant has produced a letter of offer dated 28th August, 2018, (which the Plaintiff has contested), setting out the detailed terms of the offer and engagement with the Applicant. Evidence of the same are attached to the replying affidavit of the Respondent as Exhibit JMM1 and JMM2.
4. The Applicant admitted vide a letter dated 22nd November 2022 found at page 31 of the replying affidavit that a debt remains due to the Respondent. Based on a reading of the said letter, the arrears owing at that time was the sum of approximately Kshs 17, 436, 057, which amount remains outstanding based on the record, and giving rise to the impugned action on behalf of the Defendant/ Respondent.
5. The Applicant however contended that there was no agreement that interest would be charged on delayed payments. Further, it challenged the authenticity of the Letter of Offer, which I note expressly states the precise amount to be paid as interest on delayed payments. It claimed that any interest sought by the Defendant is non-contractual and therefore illegal. Accordingly, it argued that the Defendant has no legal basis upon which to re possess the machinery which is the subject of the Hire Purchase Agreement.
6. The Defendant on the other hand submitted that the Plaintiff voluntarily signed up to the hire purchase scheme and gave the subject equipment to be charged as collateral. It submitted that once an item is given up as security to secure financial facilities then there is the potential that it may be sold in case of default. Counsel argued that the action of sale in default does not constitute an irreparable harm, and that, in any case, the subject equipment has known values in monetary terms, and their sale would be quantifiable.
7. Looking at the Agreement between the parties, it is evident from a reading of clause 6 that in the event of default of any of the circumstances outlined from part (i) to (xi), which includes the “failure to honour, meet or perform any of its obligations, terms and conditions herein contained” , then “the agreement shall automatically determine and the owner shall, without prior notice, be entitled to immediate repossession of the goods and without prejudice to the provisions of clause 7, either party shall have any or any further rights under this agreement”.
8. Further to the above, clause 7 of the Agreement states that the owner shall be entitled to immediate repossession of the goods with or without prior notice of demand, and the hirer shall:
“in addition to delivering of the goods also return the goods registration books and any licence or permits appertaining thereto, policies and certificates of insurance, and in addition thereto shall be liable to the owner in respect of all the unpaid or due arrears of hire charges including all the interest and other charges levied thereon as provided for in this agreement up to the date of termination.”
9. Based on a simple and plain reading of clauses 6 and 7 above, it is evident to me that in the event of a default as set out above, the owner is entitled to repossess the subject machinery in accordance with the terms of the Agreement. Based on the record, while it may not be clear what the exact amount of debt is owing to the Respondent, it is evident that a debt nonetheless remains due and owing to the Respondent, and that the Applicant is therefore in breach of the terms of the Agreement.
10. I state the above noting the contents of the letter dated 22nd November, 2022, which expressly admits the debt, and further, based on a reading of the statement of account dated 8th June, 2022, which shows a balance of Kshs 21, 133, 569 was due and owing to the Respondent as at that date. The statement bears the signature of S. S. Bhogal, of the Applicant, and I note that this document was also produced by the Plaintiff as the basis upon which it submitted that some payments made by the Plaintiff to the Respondent have not been captured in the Respondent’s financial statement of account.
11. In Cieni Plains Company Limited & 2 others v Ecobank Kenya Limited [2017] eKLR Justice Onguto stated at para 36 that:
"I also hasten to add that the Court of Appeal in Mrao also did make it clear that when it comes to injunctions sought to restrain mortgagees and chargees from realizing their security additional care and consideration of the circumstances of the transaction is very relevant with the focus being on whether the payment of the debt is being made and further that a dispute as to the amounts due was not good enough reason to halt the realization process even if the dispute had been occasioned by alleged illegal and contested interest."
12. Guided by the above, I do not think that a dispute in relation to the amount due to the Defendant or a dispute concerning the correct amount of interest applicable to the facility is in itself an appropriate ground for injunction. The Applicant may still pursue such a claim by way of damages at the hearing of the main suit.
13. In light of the above, I am satisfied that the Applicant has not met the threshold for a grant of injunction as set out in Giella v Cassman Brown [1973] EA 358 , namely:
a. Establish his case only at a prima facie level,
b. Demonstrate irreparable injury that cannot be compensated by way of damages if a temporary injunction is not granted, and
c. Ally any doubts as to (b) by showing that the balance of convenience is in his favour.
14. In particular, I am satisfied that based on the facts set out above the Applicant has failed to make out a prima facie case under the first limb, in accordance with Mrao Ltd v First American Bank of Kenya Limited and 2 Others [2003] eKLR , namely “a case in which on the material presented to the Court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter.”
15. It is established that all the above three conditions and stages are to be applied as separate, distinct and logical hurdles which the Applicant is expected to surmount sequentially. Having failed to pass the first hurdle, the Applicant may not leap frog to the next and that brings the matter to an end.
16. Based on the reasons as set out above, I find that the Application is without merit. The same is accordingly dismissed with costs.
2. The Applicant has not denied that the parties entered into a hire purchase agreement dated 26th September 2018 (“the Agreement”) by which the plaintiff acquired machinery for purposes of its road construction business.
3. Further to the above, the Defendant has produced a letter of offer dated 28th August, 2018, (which the Plaintiff has contested), setting out the detailed terms of the offer and engagement with the Applicant. Evidence of the same are attached to the replying affidavit of the Respondent as Exhibit JMM1 and JMM2.
4. The Applicant admitted vide a letter dated 22nd November 2022 found at page 31 of the replying affidavit that a debt remains due to the Respondent. Based on a reading of the said letter, the arrears owing at that time was the sum of approximately Kshs 17, 436, 057, which amount remains outstanding based on the record, and giving rise to the impugned action on behalf of the Defendant/ Respondent.
5. The Applicant however contended that there was no agreement that interest would be charged on delayed payments. Further, it challenged the authenticity of the Letter of Offer, which I note expressly states the precise amount to be paid as interest on delayed payments. It claimed that any interest sought by the Defendant is non-contractual and therefore illegal. Accordingly, it argued that the Defendant has no legal basis upon which to re possess the machinery which is the subject of the Hire Purchase Agreement.
6. The Defendant on the other hand submitted that the Plaintiff voluntarily signed up to the hire purchase scheme and gave the subject equipment to be charged as collateral. It submitted that once an item is given up as security to secure financial facilities then there is the potential that it may be sold in case of default. Counsel argued that the action of sale in default does not constitute an irreparable harm, and that, in any case, the subject equipment has known values in monetary terms, and their sale would be quantifiable.
7. Looking at the Agreement between the parties, it is evident from a reading of clause 6 that in the event of default of any of the circumstances outlined from part (i) to (xi), which includes the “failure to honour, meet or perform any of its obligations, terms and conditions herein contained” , then “the agreement shall automatically determine and the owner shall, without prior notice, be entitled to immediate repossession of the goods and without prejudice to the provisions of clause 7, either party shall have any or any further rights under this agreement”.
8. Further to the above, clause 7 of the Agreement states that the owner shall be entitled to immediate repossession of the goods with or without prior notice of demand, and the hirer shall:
“in addition to delivering of the goods also return the goods registration books and any licence or permits appertaining thereto, policies and certificates of insurance, and in addition thereto shall be liable to the owner in respect of all the unpaid or due arrears of hire charges including all the interest and other charges levied thereon as provided for in this agreement up to the date of termination.”
9. Based on a simple and plain reading of clauses 6 and 7 above, it is evident to me that in the event of a default as set out above, the owner is entitled to repossess the subject machinery in accordance with the terms of the Agreement. Based on the record, while it may not be clear what the exact amount of debt is owing to the Respondent, it is evident that a debt nonetheless remains due and owing to the Respondent, and that the Applicant is therefore in breach of the terms of the Agreement.
10. I state the above noting the contents of the letter dated 22nd November, 2022, which expressly admits the debt, and further, based on a reading of the statement of account dated 8th June, 2022, which shows a balance of Kshs 21, 133, 569 was due and owing to the Respondent as at that date. The statement bears the signature of S. S. Bhogal, of the Applicant, and I note that this document was also produced by the Plaintiff as the basis upon which it submitted that some payments made by the Plaintiff to the Respondent have not been captured in the Respondent’s financial statement of account.
11. In Cieni Plains Company Limited & 2 others v Ecobank Kenya Limited [2017] eKLR Justice Onguto stated at para 36 that:
"I also hasten to add that the Court of Appeal in Mrao also did make it clear that when it comes to injunctions sought to restrain mortgagees and chargees from realizing their security additional care and consideration of the circumstances of the transaction is very relevant with the focus being on whether the payment of the debt is being made and further that a dispute as to the amounts due was not good enough reason to halt the realization process even if the dispute had been occasioned by alleged illegal and contested interest."
12. Guided by the above, I do not think that a dispute in relation to the amount due to the Defendant or a dispute concerning the correct amount of interest applicable to the facility is in itself an appropriate ground for injunction. The Applicant may still pursue such a claim by way of damages at the hearing of the main suit.
13. In light of the above, I am satisfied that the Applicant has not met the threshold for a grant of injunction as set out in Giella v Cassman Brown [1973] EA 358 , namely:
a. Establish his case only at a prima facie level,
b. Demonstrate irreparable injury that cannot be compensated by way of damages if a temporary injunction is not granted, and
c. Ally any doubts as to (b) by showing that the balance of convenience is in his favour.
14. In particular, I am satisfied that based on the facts set out above the Applicant has failed to make out a prima facie case under the first limb, in accordance with Mrao Ltd v First American Bank of Kenya Limited and 2 Others [2003] eKLR , namely “a case in which on the material presented to the Court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter.”
15. It is established that all the above three conditions and stages are to be applied as separate, distinct and logical hurdles which the Applicant is expected to surmount sequentially. Having failed to pass the first hurdle, the Applicant may not leap frog to the next and that brings the matter to an end.
16. Based on the reasons as set out above, I find that the Application is without merit. The same is accordingly dismissed with costs.