REPUBLIC OF KENYA
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMM NO. 50 OF 2011
DIAMOND TRUST BANK OF KENYA LIMITED………...………..PLAINTIFF
-VERSUS-
ORIENTAL COMMERCIAL BANK LIMITED……....…...............DEFENDANT
DEFENCE & COUNTER CLAIM
ORIENTAL COMMERCIAL BANK LIMITED……....…...................PLAINTIFF
-VERSUS-
DIAMOND TRUST BANK OF KENYA……………...………..1ST DEFENDANT
KENG SERVICES LIMITED………………………..…………2ND DEFENDANT
SUSAN KERUBO BIGINGI………………………………...….3RD DEFENDANT
GILBERT GICHANA NAMWOCHA……………………….....4TH DEFENDANT
NATIONAL TRANSPORT & SAFETY
AUTHORITY (Sued as the successor of the
Registrar of Motor Vehicles)………………………...…………..5TH DEFENDANT
JUDGMENT
1. The plaintiff vide a plaint dated 16th February, 2011 instituted this suit seeking judgment against the defendant as hereunder -
i) A prohibitory injunction restraining the defendant, its agents and/or servants from holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever;
ii) A mandatory injunction compelling the defendant, its agents and/or servants to immediately and unconditionally release motor vehicle registration number KBC 545S and trailer registration number ZC 9200 to the plaintiff or the plaintiff’s appointed servants and/or agents;
iii) A permanent injunction barring the defendant from ever obstructing or interfering with the plaintiff’s ownership of motor vehicle registration number KBC 545S and trailer registration number ZC 9200 through inter alia attaching, holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever on account of the debt owed to the defendant by its customer;
iv) The costs of this suit together with interest thereon at Court rates from the date of filing the suit until payment in full;
v) General damages; and
vi) Such other and further relief as this Honourable Court may deem just and fit to grant.
2. The plaintiff’s case is that it was the actual and registered owner of motor vehicle registration number KBC 545S and trailer registration number ZC 9200, and had hired it to Malison Transporters Company Limited pursuant to a Hire Purchase agreement between the plaintiff and the said company. The plaintiff averred that on or about 29th January, 2011, the defendant forcefully took possession of the said vehicle and trailer in the pretext of repossessing it due to a debt owed to the defendant by one of its customers.
3. The plaintiff contended that the purported repossession of the suit motor vehicle by the defendant was unlawful, illegal, null and void since the defendant lacked any legal, equitable, beneficial or registrable interest in the said vehicle and trailer. It was stated by the plaintiff that the defendant has since refused to release the said motor vehicle registration number KBC 545S and trailer registration number ZC 9200 together with the third-party goods that were being ferried in the said vehicle when it was seized.
4. In opposition to the plaintiff’s suit, the defendant filed a defence and counter-claim dated 11th March, 2011, which was subsequently amended on 28th November, 2013. In its defence, the defendant denied all the averments in the plaintiff’s plaint and averred that motor vehicle registration number KBC 545S was first registered in the name of Keng Services Limited and has never been legally transferred to any other person. It further averred that the purported registration of the said motor vehicle in the name of the plaintiff and Keng Services Limited was done fraudulently by the plaintiff and/or its agents, the Directors of Keng Services Limited and/or their servants, and officials at the office of the Registrar of motor vehicles. The defendant contended that it repossessed motor vehicle registration number KBC 545S pursuant to the powers conferred on it by a debenture dated 17th July, 2009 and registered on 29th July, 2009.
5. The defendant in its counter-claim averred that it created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs.3,000,000/= advanced to Keng Services Limited and guaranteed by Susan Kerubo Bigingi and Gilbert Gichana Nyamwocha. It further averred that the 3rd & 4th defendants in the counter-claim are Directors of the 2nd defendant in the counter-claim and that they executed a deed of guarantee and indemnity in respect of the debenture dated 17th July 2009 guaranteeing the payment of Kshs. 3,000,000/=, together with costs and interest.
6. It was stated by the defendant that the 2nd defendant in the counter-claim has defaulted in making payments to clear its indebtedness to the defendant, thus as at 30th October, 2013, the said debt stood at Kshs.6,769,789.40 which amount continues to attract interest at the rate of 27.5% per annum. In view of the above, the defendant asserted that the charge over the said motor vehicle by the defendant ranks in priority over all other claims.
7. The defendant prays for the plaintiff’s suit to be dismissed with costs and for judgment in the counter-claim to be entered in its favour against the defendants for –
i) A declaration that Keng Services Limited is the legal and registered owner of motor vehicle registration No. KBC 545S and that the debenture created over the same motor vehicle in favour of the defendant has first and paramount priority over all other claims over the said motor vehicle;
ii) A declaration that the purported transfer of motor vehicle registration No. KBC 545S from Keng Services Limited to the joint names of the plaintiff and Keng Services Limited was procured fraudulently and is null and void;
iii) Payment of the sum of Kshs.6,769,789.40 together with interest at 27.5% per annum or at such other rate as the plaintiff in the counter-claim may in its sole and absolute discretion from time to time determine from 30th October, 2013 until payment in full against the 2nd, 3rd & 4th defendants jointly and severally; and
iv) Costs of this counter-claim.
8. The plaintiff filed a defence to the defendant’s counter-claim where it denied all the averments contained in the said counter-claim and averred that as at 17th June, 2009, it was already a registered owner of motor vehicle registration number KBC 545S, hence Keng Services Limited had no capacity to create a charge over it in favour of the defendant. Thus, if at all there was fraud, it was on the part of the defendant when the debenture in its favour was created, but it did not impeach the validity of the plaintiff’s title. The plaintiff further averred that it was legally entitled to repossess motor vehicle registration number KBC 545S from Keng Services Limited and hire the same to Malison Transporters Limited by virtue of being the actual owner of the said motor vehicle.
9. The 5th defendant in the counter-claim filed a statement of defence dated 29th June, 2018 where it denied all the averments contained in the defendant’s counter-claim and averred that it is a public body established in accordance with Section 3 of the National Transport & Safety Authority Act with the statutory functions of inter alia to advise and make recommendations to the Cabinet Secretary on matters relating to road transport and safety, implement policies relating to road transport and safety; plan, manage, and regulate the road transport system, ensure the provision of safe, reliable and efficient road transport services and most importantly, to administer the Traffic Act, Chapter 403 Laws of Kenya.
10. The 5th defendant stated that the amended counter-claim does not relate to its mandate, as it is a private dispute between the plaintiff and the 1st to 4th defendants in the counter-claim in relation to a debenture over motor vehicle registration No. KBC 545S allegedly charged as security for a sum of Kshs.3,000,000/=, which issue, the 5th defendant is not privy to. It contended that the suit against it by the defendant (now plaintiff in the counter-claim) does not disclose a reasonable cause of action against it.
11. This matter proceeded to hearing where the plaintiff called one witness in support of its case, and the defendant also called on witness to ventilate its case.
PLAINTIFF’S CASE.
12. Mr. Lwanga Mwangi testified as PW1. He stated that he is a Debt Recovery Officer at Diamond Trust Bank of Kenya Limited and his duties include monitoring loan payments, undertaking recovery of facilities in default, reporting on loan portfolio performance, negotiating settlement with defaulting debtors and reviewing securities. He testified that pursuant to a letter of offer dated 11th July, 2008, the plaintiff agreed to finance the purchase of a used Scania Prime Mover registration number KBC 545S by Keng Services Limited on hire purchase terms from Kenya Garage Vehicle Industries Limited. That thereafter, the plaintiff and Keng Services Limited executed a Hire Purchase Agreement No. 008HPLC082050004 dated 22nd July, 2008. He further testified that vide a letter of offer dated 14th August, 2008, the plaintiff agreed to advance financial facilities to Mr. Gilbert Gichana Nyamwocha, a Director of Keng Services for the purchase of a new motor vehicle being a Shenzen trailer registration number ZC 9200 on hire purchase terms.
13. PW1 testified that subsequently, the plaintiff and Mr. Gilbert Gichana Nyamwocha executed a Hire Purchase Agreement No. 008HPLC082560003 dated 11th September, 2008. It was PW1’s evidence that it was a term of both Hire Purchase Agreements inter alia that the financed vehicles would be registered in the joint names of the bank and the customers as security for the hire purchase facility, and the log books for the aforesaid vehicles together with duly executed blank transfer forms for the same would be lodged with the bank for safe custody. He stated that it was also agreed that in the event of default and/or breach of the terms of the hire purchase facilities, the bank would be at liberty to terminate the same and repossess and/or sell the motor vehicles to recover its facility.
14. PW1 testified that both Keng Services Limited and Gilbert Gichana Nyamwoncha defaulted on their respective facilities, and the bank exercised its right pursuant to the respective hire purchase agreements, repossessed and sold the aforesaid motor vehicles to Malison Transporters Company Limited sometime in September 2010. Consequently, vide a letter of offer dated 9th September, 2010 the plaintiff agreed to finance Malison Transporters Company Limited for the purchase of the suit motor vehicles on hire purchase terms. Thereafter, the plaintiff and Malison Transporters Company Limited executed a hire purchase agreement No. 008HPLC102670002 dated 20th September, 2010 under the same terms as the hire purchase facilities granted to Keng Services Limited.
15. Mr. Mwangi testified that in a letter dated 31st January, 2011, the plaintiff was informed by Malison Transporters Company Limited that while transporting a customer’s goods, the defendant had repossessed the suit motor vehicle. He stated that the plaintiff’s Advocates on record under the instructions of the plaintiff issued a demand letter date 1st February, 2011 to the defendant, demanding immediate release of the suit motor vehicles. That the defendant’s Advocates in a letter dated 5th February, 2011 responded to the said letter stating that Keng Services Limited had by way of a debenture dated 17th July, 2009 charged the suit motor vehicles in favour of the defendant. Attached to that letter was a copy of the said debenture and a duplicate log book apparently issued by the Registrar of motor vehicles showing the defendant and Keng Services Limited as joint registered owners of the suit motor vehicles.
16. PW1 asserted that from the documents produced by the defendant, it is clear that the hire purchase facility extended by the plaintiff to Keng Services Limited was registered before the alleged debenture in favour of the defendant and since registration confers interest, the plaintiff enjoys priority over any other subsequent interest over the said motor vehicle. Further, that as at 17th July, 2009, Keng Services Limited had no right to charge motor vehicle registration No. KBC 545S as the same was jointly registered in its name and that of the plaintiff, and the bank neither discharged the said vehicle nor consented to any subsequent charge over it. Mr. Mwangi stated that in the premise, the defendant had not disclosed any legal or equitable interest in the suit motor vehicles that would entitle it to repossess them.
17. In cross-examination, PW1 stated that at the time it financed Keng Services Limited to purchase motor vehicle registration No. KBC 545S, the said vehicle was registered in the name of Kenya Garage Vehicle Industries Limited. He further stated that whether or not the said vehicle was in the name of the said dealer, it still had a right to dispose of it. He contended that the Hire Purchase Agreement between the plaintiff and Keng Services Limited seems not to have been registered, but confirmed that after entering into the said agreement, motor vehicle registration No. KBC 545S was registered jointly in the name of the plaintiff and Keng Services Limited. He stated that in as much as he had testified that the aforementioned motor vehicle was registered in the name of another person before it was transferred to the plaintiff and the 2nd defendant’s name in the counter-claim, he had no evidence of the transfer document in Court.
18. PW1 stated that at page 110 of the defendant’s documents, there is a log book in the name of Keng Services Limited which indicates that the registration date was 16th July, 2008 and there were no previous owners. That the said log book further shows that motor vehicle registration No. KBC 545S was imported from the United Kingdom. He averred that he could not explain how the plaintiff entered into an agreement with Keng Services Limited to purchase a vehicle that was already owned by the said company, however at pages 64 & 65 of the plaintiff’s documents, it was clear that as at 23rd July, 2008 & 30th August, 2008, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. PW1 denied that the plaintiff fraudulently had motor vehicle registration No. KBC 545S registered in joint names.
19. Mr. Mwangi averred that he did not have any documents to show when motor vehicle registration No. KBC 545S was repossessed by the plaintiff. He explained that after repossessing a vehicle from a defaulter, it is sold either by private treaty or auction, but in this case he did not know how the vehicle was sold to Malison Transporters Company Limited.
20. PW1 denied that Keng Services Limited was the owner of motor vehicle registration No. KBC 545S when it took a facility from the defendant and stated that the defendant created a debenture over the said motor vehicle without knowledge that it was already charged to the plaintiff. He confirmed that the said vehicle was released to the plaintiff on the understanding that it would be liable to pay any damages suffered by the defendant as a result of the said release. PW1 asserted that the plaintiff properly financed motor vehicle registration No. KBC 545S, thus it was not liable to pay the defendant.
21. In re-examination, PW1 stated that the Hire Purchase Act provides for registration of Hire Purchase Agreements for companies. He further stated that Kenya Garage Vehicle Industries Limited signed a dealer’s vehicle invoice and the plaintiff paid the dealer. He contended that the issue of repossession of the suit motor vehicle from Keng Services Limited is not an issue before this Court.
DEFENDANT’S CASE.
22. Rose Wangechi Kariuki testified as DWI. She stated that she is a Credit Officer at the defendant bank, in Nakuru branch. She explained that in that capacity she receives applications for bank facilities, monitors loan repayments, undertakes recoveries, reports on loan portfolio performance to Head Office, negotiates settlement with defaulting debtors, and reviews securities on their due dates. DW1 testified that Esther Kerubo Bigingi and Gilbert Gichana Nyamwocha as Directors of Keng Services Limited, which company has an account with the defendant bank, applied for an overdraft facility of Kshs.3,000,000/= on or about 15th June, 2011 and offered motor vehicle registration number KBC 545S as security by a letter of the same day. That Keng Services Limited then forwarded to the defendant log book number R02595232 and a Valuation Report for the said motor vehicle.
23. She testified that the aforesaid application was approved vide a letter dated 26th June, 2009 and the defendant agreed to make the facilities requested available subject to the defendant’s general terms and conditions. That Keng Services Limited accepted the offer by the defendant and the following securities were to be held by the defendant: Specific Debenture RSC Kshs.3,000,000/= over 2 motor vehicles, a truck KBC 545S Prime Mover, with CMV Kshs.3.49 Million and a Mercedes Benz KAU 797Y, with a CMV Kshs.1.5 Million; Personal Guarantees by the Directors Gilbert Gichana Nyamwocha & Susan Kerubo Bigingi for Kshs.3,000,000/= each, signed and witnessed by their Advocates; Company resolution authorizing the borrowing of Kshs.3,000,000/= & requesting the Directors to guarantee repayment of the facilities.
24. DW1 asserted that thereafter, the Directors of Keng Services Limited forwarded to them the certificate of incorporation, Memorandum and Articles of Association of the company, PIN Certificate for the company, a copy of a letter dated 3rd July, 2009 from the Registrar of Companies confirming the Directors and shareholding of the company, and a resolution by the company to borrow and give security. She stated that the defendant’s Advocate then prepared and registered a debenture and a deed of guarantee, and a certificate of registration of mortgage was forwarded to them.
25. DW1 stated that unfortunately, Keng Services Limited defaulted in making repayment causing the defendant’s Advocates to demand the amount due but there was no response from Keng Services limited. As a result, the defendant was forced to exercise the powers conferred on it by the debenture to authorize the repossession of motor vehicle registration number KBC 545S.
26. DW1 testified that after the said vehicle had been repossessed, the defendant received a demand letter dated 1st February, 2011, from the plaintiff claiming ownership of the said motor vehicle. That the defendant’s Advocates on record responded to the said letter vide a letter dated 5th February, 2011 which letter was further responded to by the plaintiff through letters dated 10th & 11th February, 2011. She further testified that on perusal of the documents attached to the plaintiff’s letters, they noted that motor vehicle registration number KBC 545S was first registered on 16th July, 2008 in the name of Keng Services limited and logbook number R02595232Z was issued on 28th July, 2008.
27. DW1 stated that in as much as a copy of records was issued by the Registrar of Motor Vehicles indicating that the said motor vehicle was jointly registered in the same name of the plaintiff and Keng Services Limited, no log book to that effect had been provided by the plaintiff. Further, that logbook number R0951759J issued in the joint names of the plaintiff and Malison Transport Company Limited shows that there is only one previous owner of the said motor vehicle.
28. As a result of the foregoing, DW1 contended that they concluded that there was fraud involved in the issues regarding the registration of the said motor vehicle, thus their Advocates on record reported the matter to the Banking Fraud Investigations Department through a letter dated 15th February, 2011. DW1 asserted that this is a clear case of the plaintiff in collusion with Keng Services Limited and the Registrar of Motor Vehicles trying to hide the true picture of the ownership of the motor vehicle in question, with a view of frustrating the efforts of the Bank (defendant) in recovering the monies advanced to Keng Services Limited and properly secured by a debenture over motor vehicle Registration number KBC 545S which now stands at Kshs.6,769,789.40 and it continues to accrue interest at 13% per annum.
29. During cross-examination, DW1 stated that she is not aware if the defendant noted that the logbook provided by Keng Services Limited was a duplicate logbook. She further stated that the defendant was to register a debenture with the Registrar of Companies to show that there is a charge. DW1 admitted that the defendant did not do a search with the Registrar of Motor Vehicles when Keng Services Limited offered motor vehicle registration No. KBC 545S as security for a financial facility advanced to it by the defendant, hence the defendant did not know whether the said motor vehicle had been registered in the name of another entity. She confirmed that Keng Services Limited applied for an overdraft facility on 15th June, 2009 and not 15th June, 2011. She also confirmed that the log book of the said motor vehicle availed by Keng Services Limited was a duplicate.
30. DW1 stated that the log book at page 11 of the plaintiff’s initial bundle of documents shows that it is an original log book, whereas the one at page 8 of the defendant’s bundle of documents indicates that it is a duplicate logbook. Further the number on the original logbook is different from the number on the duplicate log book. She confirmed that the plaintiff’s offer letter to Keng Services Limited was written before the defendant’s offer letter and the defendant had not produced a log book showing joint registration of motor vehicle registration No. KBC 545S with Keng Services Limited. DW1 confirmed that the defendant had not produced a statement of accounts for Keng Services Limited.
31. In re-examination, DW1 stated that at page 91 of the defendant’s documents is a demand letter dated 13th July, 2010 showing the amount due to the defendant from Keng Services Limited as Kshs.3,161,390/=.
32. At the close of the defendant’s case, the Court closed the 5th defendant’s case in the counter-claim in view of the fact that Counsel who was holding brief for Mr. Ochieng, learned Counsel for the 5th defendant, walked out of Court when the Court directed that the case would proceed to hearing. The Court then directed parties to file written submissions. The plaintiff’s submissions were filed on 7th July, 2023 by the law firm of Madhani Advocates LLP, and the 5th defendant’s submissions were filed by the law firm of Prof. Albert Mumma & Company Advocates on 28th August, 2023. The defendant in the main suit did not file any written submissions despite having been given additional time to do so by this Court.
33. Mr. Shah, learned Counsel for the plaintiff submitted that the defendant has only addressed itself to motor vehicle registration No. KBC 545S and has not made any claim either through its pleadings or at the hearing of the main suit in relation to the trailer registration No. ZC 9200. For this reason, the plaintiff’s claims in relation to the trailer registration No. ZC 9200 are uncontroverted and therefore ought to be allowed as prayed.
34. Counsel referred to clause 8 of the Hire Purchase Agreements between the plaintiff and Keng Services Limited on the one hand, and the plaintiff and Gilbert Gichana Nyamwocha on the other hand, and submitted that by virtue of the said agreements, the plaintiff is the proper owner of the suit motor vehicles, whereas Keng Services Limited was a mere bailee who did not have proper title to dispose of or use the suit motor vehicles as security for the overdraft facility obtained from Oriental Commercial Bank (defendant). To buttress this submission, Counsel relied on the Black’s Law Dictionary definition of a Bailee.
35. He relied on the case of Joseph Hinga & 2 others v Joseph Tirop [2022] eKLR, where the Court expounded on the principle of Nemo Dat Quod Non Habet, the case of Merit Development Limited v Lenana Investment Limited & 2 others [2018] eKLR and clause 2(i) of the Hire Purchase Agreements and contended that there is no evidence that Keng Services Limited sought the plaintiff’s authority to use motor vehicle registration No. KBC 545S as security to procure an overdraft facility from the defendant. He stated that as a result, the transaction between Keng Services Limited and the defendant is void ab initio.
36. In submitting that the plaintiff’s proprietary interests in the suit vehicles cannot be diminished by the transaction between Keng Services Limited and the defendant. He contended that the defendant cannot purport to make a claim for the suit motor vehicles on account of a security that was not valid. He referred to the case of Daniel Kiprugut Maiywa v Rebecca Chegkurgat Maina [2019] eKLR.
37. Mr. Shah cited the provisions of Section 3(1) of the Hire Purchase Act and the Court of Appeal cases of Diamond Trust Bank Kenya Limited (Formerly Diamond Trust of Kenya Limited) v Jaswinder Singh Enterprises [1999] eKLR and Taawawa Supermarket Limited v Fina Bank Ltd [2010] eKLR and asserted that the issue of whether or not the Hire Purchase Agreements herein were registered has no bearing and/or effect on this case since the provisions of the Hire Purchase Act were not contemplated to apply to body corporates. He argued that the issue of whether the plaintiff’s repossession of the financed motor vehicles is illegal was never an issue before this Court since Keng Services Limited never objected to the said repossession. He stated that the above notwithstanding, the plaintiff was mandated under clause 4 of the Hire Purchase Agreements to repossess the financed motor vehicles in the event of default by the hirer.
38. Counsel for the plaintiff referred to the provisions of Section 8 of the Traffic Act and the Court of Appeal case of Joel Muga Opinja v East Africa Sea Food Ltd [2013] eKLR and stated that in view of the copy of records from the Registrar of Motor Vehicles showing ownership as at 23rd July, 2008 and the log book showing ownership as at 10th September, 2008, the plaintiff is the proper owner of the suit motor vehicles. This is because, an official search of records from the Registrar of Motor Vehicles is prima facie evidence of joint ownership. Mr. Shah further stated that the only reason Keng Services Limited was named in the ownership records of motor vehicle registration No. KBC 545S as contended by the defendant, is because of it being financed to purchase it by the plaintiff.
39. Counsel for the plaintiff relied on the case of R.G. Patel v Lalji Maknji [1962] EA cited with approval in the case of Ndege Kabibi Kimanga & another v Karinga Gaciani & 12 others [2016] eKLR and argued that allegations of fraud must be strictly proved, but in this case the defendant has made allegations that the registration of motor vehicle registration number KBC 545S in the joint names of the plaintiff and Keng Services Limited was procured by fraud, but has not produced any evidence in support of this allegation. He submitted that the plaintiff has demonstrated to the Court the due procedure and processes that led to the registration of the suit vehicles in its name.
40. Mr. Shah referred to the Court of Appeal case of Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & another [2015] eKLR, on privity of contract and contended that the plaintiff is a stranger to the letter of offer issued to Keng Services Limited by the defendant and the terms and the obligations therein, thus it cannot be liable to pay the amounts claimed by the defendant. He relied on the case of Gulf African Bank Limited v Atticon Limited & 4 others (Comm. Case No. 086 of 2019) and submitted that since the defendant without conducting a motor vehicle search proceeded to issue an overdraft facility to Keng Services Limited, with motor vehicle registration No. KBC 5453 as security for the said facility, any loss occasioned by the defendant’s negligence in conducting proper due diligence should be borne by the defendant.
41. It was stated by Counsel that the plaintiff having demonstrated that it has bona fide proprietary interest of motor vehicle registration No. KBC 545S and trailer registration No. ZC 9200, a permanent injunction should issue against the defendant barring it from interfering with its ownership over the suit motor vehicles. To this end, Mr. Shah relied on the case of Kenya Power & Lighting Co. Limited v Sheriff Molana Habib [2018] eKLR. He further relied on the case of Peter Muriuki Ngure v Equity Bank (K) Ltd [2018] and asserted that the plaintiff should be awarded costs of this suit.
42. Mr. Ochieng, learned Counsel for the 5th defendant submitted that the defendant confirmed that it did not undertake any search or engage in any form of due diligence to confirm that motor vehicle registration number KBC 545S indeed belonged to Keng Services Limited, thus establishing its suitability as collateral for ensuring the repayment of the loan extended to Keng Services Limited. He referred to the provisions of Section 5 of the Traffic Act and asserted that the defendant had a reasonable obligation to conduct due diligence on motor vehicle motor vehicle registration number KBC 545S, which would have revealed that it was jointly owned by Keng Services Limited and Diamond Trust Bank Limited, hence it was not a suitable collateral for ensuring repayment of the loan extended to Keng Services Limited by the Oriental Commercial Bank (defendant).
43. Mr. Ochieng stated that the logbook presented to the defendant by Keng Services Limited served as prima facie evidence of ownership of motor vehicle registration number KBC 545S, but it was still incumbent upon the defendant to conduct proper due diligence and perform a search in accordance with Section 5 of the Traffic Act to confirm and establish that Keng Services Limited was the rightful owner of motor vehicle registration number KBC 545S before attempting to use it the vehicle as collateral for the loan. He submitted that such due diligence would have revealed that motor vehicle registration number KBC 545S was jointly owned by both Keng Services Limited and Diamond Trust Bank Limited, thus it was not a suitable collateral for ensuring the repayment of the loan extended to Keng Services Limited.
44. Counsel further submitted that the defendant cannot hold the 5th defendant accountable for the failure to conduct due diligence and establish the appropriateness of the vehicle as collateral for the overdraft facility. Mr. Ochieng relied on the Court of Appeal case of Samuel Kamere v Lands Registrar, Kajiado [2015] eKLR to buttress his argument.
45. He stated that the defendant in its counter-claim has not made any specific allegations against the 5th defendant related to any act or omission that would be in violation of the provisions of the Traffic Act or the National Transport and Safety Authority Act, No. 33 of 2012, and in the absence of a legal and/or factual dispute between the defendant and the 5th defendant, the 5th defendant was not a necessary party in these proceedings. He also stated that there is no indication in the said counter-claim that the 5th defendant negligently failed to fulfill any of its duties, thus giving rise to a cause of action for which it could be held liable for any of the remedies sought in the counter-claim.
ANALYSIS AND DETERMINATION.
46. I have considered and analyzed the evidence adduced in Court, the pleadings filed, alongside the written submissions by Counsel for the plaintiff and the 5th defendant. The issues that arise for determination are -
i) Who has bonafide proprietary interest in the suit motor vehicles?;
ii) Whether the log book of motor vehicle registration Number KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited;
iii) Whether the 2nd, 3rd, & 4th defendants in the counter-claim are liable to the defendant in the main suit in the sum of Kshs.6,769,789.40; and
iv) Whether the plaintiff is entitled to an order of permanent injunction.
47. Before I delve into the merits and demerits of this suit, it is worth noting that the 2nd, 3rd & 4th defendants in the counter-claim never participated in these proceedings despite service of the pleadings on them. The defendant in the main suit vide a request for judgment dated 6th May, 2014 attempted to have interlocutory judgment for the sum of Kshs.6,769,789.40 entered against them for failure to enter appearance. The Court on 13th August, 2014 sought clarification on whether leave to serve by substituted service was ever granted. From the record, there is no evidence of the aforementioned request for judgment ever being endorsed, or interlocutory judgment being entered against the 2nd, 3rd & 4th defendants in the counter-claim as sought by the defendant in the main suit.
Who has bonafide proprietary interest in the suit motor vehicles.
Trailer registration No. ZC 9200
48. The plaintiff has demonstrated that it indeed financed the purchase of trailer registration No. ZC 9200 by Gilbert Gichana Nyamwocha by way of a letter dated 14th August, 2008. This is evidenced by a Hire Purchase Agreement between it and Gilbert Gichana Nyamwocha dated 11th September, 2008, a copy of statements of accounts for the hire purchase facility extended to Gilbert Gichana Nyamwocha, and a copy of the original logbook of the said trailer which shows that it was registered in the joint names of the plaintiff and Gilbert Gichana Nyamwocha. The plaintiff has also demonstrated that the defendant in the main suit defaulted in its loan repayment obligations and as a result, it repossessed trailer registration No. ZC 9200 and sold it to Malison Transporters vide a letter of offer dated 9th September, 2010. A Hire Purchase Agreement between the plaintiff and Malison Transporters Company Limited dated 20th September, 2010, and a copy of the original logbook for the said trailer registered in the joint names of the plaintiff and Malison Transporters Company Limited were produced in evidence.
49. It is noteworthy from the defendant’s pleadings and evidence before this Court that the defendant has no demonstrable proprietary interest and/or claim over trailer registration No. ZC 9200. For this reason and in light of the foregoing, this Court finds that the plaintiff has a bonafide proprietary interest in the said trailer and the defendant has none.
Motor vehicle registration No. KBC 545S.
50. In order to determine the question of who between the plaintiff and the defendant in the main suit has bonafide proprietary interest in motor vehicle registration number KBC 545S, it has to determine who was the rightful and/or legal owner of the said vehicle at the time it was offered as security to the defendant in the main suit. It is not disputed that the plaintiff vide a letter of offer and Hire Purchase Agreement dated 11th July, 2008 and 22nd July, 2008 respectively, financed the purchase of a Scania Prime Mover registration number KBC 545S by Keng Services Limited on hire purchase terms from Kenya Garage Vehicle Industries Limited. It is also not disputed that the defendant created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs. 3,000,000/= advanced to Keng Services Limited and guaranteed by Susan Kerubo Bigingi and Gilbert Gichana Nyamwocha sometime in June 2009.
51. The defendant contended that since the said motor vehicle was registered solely in the name of Keng Services Limited, the said company had every right to offer motor vehicle registration number KBC 545S to the defendant as security for a financial facility advanced to it. The plaintiff on the other hand submitted that as at June 2009, motor vehicle registration number KBC 545S was registered in the names of both the plaintiff and Keng Services Limited, thus the said company had no right to offer the said motor vehicle as security to the defendant without the plaintiff’s consent.
52. It is evident from the record that as at 16th July, 2008, motor vehicle registration number KBC 545S was registered solely in the name of Keng Services Limited as can be seen from the original log book of the said motor vehicle issued on 28th July, 2008, found at page 11 of the plaintiff’s bundle of documents filed on 17th February, 2011. It is now well settled that the presumption of ownership arising out of the production of a title document is the best evidence prima facie to demonstrate one’s ownership rights. The said presumption is however not absolute and may be rebutted based on the facts of a case and the evidence produced. In this case, the plaintiff produced copies of records from the Registrar of Motor Vehicles found at pages 64, 65, & 66 of its bundle of documents filed on 10th September, 2018 showing that as at 23rd July, 2008, 30th August, 2008, and 18th September, 2010, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. To this end, I am bound by the Court of Appeal’s holding in the case of Joel Muga Opinja v East Africa Sea Food Ltd [2013] eKLR, where it was held as follows-
“We agree that the best way to prove ownership would be to produce to the Court a document from Registrar of Motor Vehicles showing who the registered owner is ...”
53. The 5th defendant in its submissions stated that if the defendant had exercised due diligence and carried out a search of motor vehicle registration No. KBC 545S at the Registrar of Motor Vehicles, it would have established that the said vehicle was jointly owned by both Keng Services Limited and Diamond Trust Bank Limited (plaintiff) and was as such not a suitable collateral for securing the repayment of the loan extended to Keng Services Limited.
54. In the circumstance, this Court is satisfied by the evidence adduced that as at June 2009, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. As a result, before Keng Services Limited could use the said motor vehicle for any other purpose other than that which it was contained in the Hire Purchase Agreement, and/or before charging it to another institution to secure financial facilities, it ought to have first sought the consent of the plaintiff. It is not disputed that as at the time Keng Services Limited was offering motor vehicle registration No. KBC 545S as security to the defendant, it had not fully repaid the plaintiff. For this reason, the provisions under Clause 2(l) & 8 of the Hire Purchase Agreement dated 22nd July, 2008 were still in force. They state as hereunder-
“Clause 2 (l)
not to allow the vehicle to pass out of his custody or control nor to sell, assign, pledge, mortgage, under/at, lend or part with possession of the vehicle/ Goods nor in any way deal or dispose or attempt to dispose of the Vehicle/ Goods or any part of his interest therein nor represent himself to be not to do or suffer to be done anything whereby he may be reputed to be the owner of the Vehicle/ Goods; nor to take or send the Vehicle/ Goods or permit the some to be taken or sent out of Kenya.”
“Clause 8
Unless and until all sums due by the Hirer to the owner hereunder shall have been duly paid to the owner and the option contained in clause 6/b/ hereof shall have been exercised the Vehicle/Goods shall remain the absolute property of the Owner anal the Hirer shall have no light or interest to or in the same other than as a mere bailee thereof.”
55. In light of the above provisions, the plaintiff was to remain the absolute owner of motor vehicle registration No. KBC 545S. Keng Services Limited was to remain the hirer of the said motor vehicle, until it fully repaid its debt to the plaintiff. The plaintiff in this case relied on the principle of nemo dat quod non habet. The Court in the case of Daniel Kiprugut Maiywa v Rebecca Chepkurgat Maina (supra) addressed the said principle as follows -
"The nemo dat principle means one cannot give what he does not have. This principle is intended to protect the title of the true owner. The rationale behind this principle is that whoever owns the legal title to property holds the title thereto until he or she decides to transfer it to someone else. Accordingly, an unauthorized transfer of the title by any person other than the owner generally has no legal effect, which means the owner continues to hold the title to the property while the person who received the invalid title owns nothing. However, the law provides some exceptions to this rule in the following certain circumstances; For example where a person buys the property in good faith believing that the person who sold it to him was the owner or authorized agent of the owner; where the property is sold by a mercantile agent who is in possession of the goods or documents of title; sale by a joint owner who sells the property with the permission of the co-owner or sale by a person in possession of goods or property under a voidable contract.”
56. In this case, DW1 testified that when advancing the financial facility to Keng Services Limited, the said company supplied them with a copy of a duplicate log book for motor vehicle registration No. KBC 545S on whose strength the defendant created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs.3,000,000/= advanced to Keng Services Limited. In cross-examination, DW1 confirmed that the defendant did not carry out a search to confirm that Keng Services Limited was the registered owner of the said motor vehicle. I do agree with Counsel for the plaintiff in the main suit and the 5th defendant in the counter-claim, that the defendant in the main suit had a duty to verify the ownership of motor vehicle registration No. KBC 545S by conducting a search at the Registrar of Motor Vehicles, before accepting the said vehicle as security for financial facilities extended to Keng Services Limited, even more so because what was supplied to it by Keng Services Limited was a duplicate log book and not an original log book. Failure to conduct due diligence by the defendant in the main suit amounts to negligence on its part.
57. As such, the defendant’s case in the main suit does not qualify as one of the exceptions to the principle of nemo dat quod non habet since the said defendant failed to exercise due diligence. Consequently, this Court finds that there was no way for the defendant to acquire a better title over motor vehicle registration No. KBC 545S than that of the plaintiff. It emerged from the evidence that the Hire Purchase Agreement between the plaintiff and Keng Services Limited was not registered, thus was null and void and had no legal effect. Section 3 (1) of the Hire Purchase Act provides that –
“This Act applies to and in respect of all hire-purchase agreements entered into after the commencement of this Act under which the hire-purchase price does not exceed the sum of four million shillings or such other higher or lower sum as the Cabinet Secretary may, after taking into account market forces from time to time prevailing, prescribe other than a hire-purchase agreement in which the hirer is a body corporate, wherever incorporated:
Provided that monetary limitation does not apply so as to affect the definition of "hire-purchase business" in section 2(1).
58. The Court of Appeal in the case of Taawawa Supermarket Limited v Fina Bank Ltd (supra) held that –
“A pertinent hypothetical question may be asked: why would an individual hirer take advantage of the Act to a limited extent when a body corporate would not be limited by any monetary threshold? No compelling reason presents itself to us and we find in the circumstances that the intention of Parliament was to exclude purchases made by co-operative societies and registered companies from the operation of the Act, and not merely to remove the monetary threshold for corporations. With that finding, the issue of registration of the agreement under section 5 (1) does not arise…”
59. It is noteworthy that the Hire Purchase agreement in question which is dated 22nd July, 2008 is between the plaintiff and Keng Services Limited which is a body corporate and/or a registered company. For this reason, the issue of registration does not arise.
60. In the premise, this Court finds that the plaintiff has a bonafide proprietary interest in motor vehicle registration No. KBC 545S, whereas the defendant has none.
Whether the log book for motor vehicle registration Number KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited.
61. It is trite law that allegations of fraud must be strictly pleaded and proved. The Court of Appeal in the case of Jephther O. Opande v Mary Atemo Gathiriga [2019] eKLR cited with authority the case of Vijay Morjaria v Nansing Darbar & another [2000] eKLR where it was stated that –
“It is well established that fraud must be specifically pleaded and that particulars of the fraud must be stated on the face of the pleadings. The acts alleged to be fraudulent must of course be set out and then it should be stated that those acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and as distinctly proved and it is not allowable to leave fraud to be inferred from the acts.”
62. In this case, the defendant has not demonstrated and/or tendered any evidence in support of the allegation that the log book for motor vehicle registration No. KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited.
63. As a result of the foregoing, this Court finds that the log book for motor vehicle registration Number KBC 545S was not fraudulently transferred to the name of the plaintiff and Keng Services Limited. To the contrary, the said transfer was legal and above board.
Whether the 2nd, 3rd & 4th defendants in the counter-claim are liable to the defendant in the main suit in the sum of Kshs.6,769,789.40.
64. In support of the allegation that the defendant advanced Kshs.3,000,000/= to the 2nd defendant in the counter-claim, which loan was guaranteed by the 3rd and 4th defendants in the counter-claim , the defendant in the main suit produced before this Court a letter of offer dated 26th June, 2009 issued to Keng Services Limited for an overdraft facility of Kshs. 3,000,000/=, a deed of guarantee and indemnity between the defendant in the main suit and the 3rd and 4th defendants in the counter-claim dated 17th July, 2009 where the 3rd and 4th defendants in the counter-claim guaranteed to pay to the defendant in the main suit any monies that shall be due and owing to the defendant in the main suit by the 2nd defendant in the counter-claim, and a debenture dated 17th July, 2009 for Kshs.3,000,000/= by the 2nd defendant in the counter-claim in favour of the defendant in the main suit.
65. As explained earlier on in this judgment, the 2nd, 3rd & 4th defendants in the counter-claim did not participate in these proceedings thus the defendant’s evidence that it advanced Kshs.3,000,000/= to the 2nd defendant in the counter-claim, which loan was guaranteed by the 3rd and 4th defendants in the counter-claim remains uncontroverted. The defendant’s claim against the 2nd, 3rd & 4th defendants in the counter-claim is for special damages. It is trite law that special damages must be specifically pleaded and strictly proved. Furthermore, Sections, 107, 108 & 109 of the Evidence Act provide that he who alleges must prove. The Court of Appeal in the case of Jogoo Kimakia Bus Services Ltd v Electrocom International Ltd [1992] KLR 177 defined what constitutes special damages as follows: -
“Special damages are the precise amount of pecuniary loss which the claimant can prove to have followed from the particular facts set out in the pleadings. They must be specifically pleaded.”
66. The defendant in the main suit averred that the 2nd defendant defaulted in its loan repayment, and that the loan due to it by the 2nd defendant now stands at Kshs. 6,769,789.40 and it continues to accrue interest at 13% per annum. It did not produce any evidence such as a loan account statement for the 2nd defendant in the counter-claim, to support the said allegation. All that was produced by the defendant in the main suit as proof of the said debt are demand letters written by its Advocate on record and addressed to the 2nd, 3rd & 4th defendants in the counter-claim. This in my view is not sufficient proof of the aforementioned debt.
67. I am not persuaded that the 2nd, 3rd & 4th defendants in the counter-claim are indebted to the defendant in the main suit in the sum of Kshs.6,769,789.40.
Whether the plaintiff is entitled to an order of permanent injunction.
68. Permanent Injunctions are perpetual in nature and are generally issued after a suit has been heard and finally determined. A permanent injunction is an equitable remedy. The Court in the case of Bandari Investments & Co. Ltd v Martin Chiponda & 139 others [2022] eKLR held as follows with respect to permanent injunctions -
“Permanent Injunction fully determines the right of the Parties before the Court and is normally meant to perpetually restrain the commission of an act by the Plaintiff in order for the rights of the Plaintiff to be protected. This Court has the powers to grant the Permanent Injunction under Sections 1A, 3 & 3 A of the Civil Procedure Code, 2010 if it feels the right of a Party has been fringed, violated and/or threatened as the Court cannot just sit, wait and watch under these given circumstances…’’
69. In the end, this Court finds that the plaintiff is entitled to an order of permanent injunction having demonstrated that it has a legal and/or bonafide proprietary interest in motor vehicle registration No. KBC 545S and trailer registration No. ZC 9200.
70. The upshot is that the plaintiff’s suit against the defendant in the main suit is merited, thus successful and the defendant’s counter-claim is not successful. Section 27 of the Civil Procedure Act provides that costs follow the event, therefore the plaintiff having succeeded in this suit is awarded costs of in the main suit and in the counter-claim.
71. In the circumstance I make the following orders: -
i) A permanent injunction is hereby issued barring the defendant in the main suit from ever obstructing or interfering with the plaintiff’s ownership of motor vehicle registration number KBC 545S and trailer registration number ZC 9200 through inter alia attaching, holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever on account of the debt owed to the defendant by its customer;
ii) The defendant’s counter-claim is hereby dismissed;
iii) Costs of the main suit are awarded to the plaintiff;
iv) Costs of the counter-claim are awarded to the 1st defendant (plaintiff in the main suit) and the 5th defendant (in the counter-claim).
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 3rd day of May, 2024. Judgment delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
No appearance for the plaintiff
No appearance for the defendant
Mr. Kimathi for the 5th defendant.
IN THE HIGH COURT OF KENYA AT NAIROBI
COMMERCIAL AND TAX DIVISION
HCCOMMM NO. 50 OF 2011
DIAMOND TRUST BANK OF KENYA LIMITED………...………..PLAINTIFF
-VERSUS-
ORIENTAL COMMERCIAL BANK LIMITED……....…...............DEFENDANT
DEFENCE & COUNTER CLAIM
ORIENTAL COMMERCIAL BANK LIMITED……....…...................PLAINTIFF
-VERSUS-
DIAMOND TRUST BANK OF KENYA……………...………..1ST DEFENDANT
KENG SERVICES LIMITED………………………..…………2ND DEFENDANT
SUSAN KERUBO BIGINGI………………………………...….3RD DEFENDANT
GILBERT GICHANA NAMWOCHA……………………….....4TH DEFENDANT
NATIONAL TRANSPORT & SAFETY
AUTHORITY (Sued as the successor of the
Registrar of Motor Vehicles)………………………...…………..5TH DEFENDANT
JUDGMENT
1. The plaintiff vide a plaint dated 16th February, 2011 instituted this suit seeking judgment against the defendant as hereunder -
i) A prohibitory injunction restraining the defendant, its agents and/or servants from holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever;
ii) A mandatory injunction compelling the defendant, its agents and/or servants to immediately and unconditionally release motor vehicle registration number KBC 545S and trailer registration number ZC 9200 to the plaintiff or the plaintiff’s appointed servants and/or agents;
iii) A permanent injunction barring the defendant from ever obstructing or interfering with the plaintiff’s ownership of motor vehicle registration number KBC 545S and trailer registration number ZC 9200 through inter alia attaching, holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever on account of the debt owed to the defendant by its customer;
iv) The costs of this suit together with interest thereon at Court rates from the date of filing the suit until payment in full;
v) General damages; and
vi) Such other and further relief as this Honourable Court may deem just and fit to grant.
2. The plaintiff’s case is that it was the actual and registered owner of motor vehicle registration number KBC 545S and trailer registration number ZC 9200, and had hired it to Malison Transporters Company Limited pursuant to a Hire Purchase agreement between the plaintiff and the said company. The plaintiff averred that on or about 29th January, 2011, the defendant forcefully took possession of the said vehicle and trailer in the pretext of repossessing it due to a debt owed to the defendant by one of its customers.
3. The plaintiff contended that the purported repossession of the suit motor vehicle by the defendant was unlawful, illegal, null and void since the defendant lacked any legal, equitable, beneficial or registrable interest in the said vehicle and trailer. It was stated by the plaintiff that the defendant has since refused to release the said motor vehicle registration number KBC 545S and trailer registration number ZC 9200 together with the third-party goods that were being ferried in the said vehicle when it was seized.
4. In opposition to the plaintiff’s suit, the defendant filed a defence and counter-claim dated 11th March, 2011, which was subsequently amended on 28th November, 2013. In its defence, the defendant denied all the averments in the plaintiff’s plaint and averred that motor vehicle registration number KBC 545S was first registered in the name of Keng Services Limited and has never been legally transferred to any other person. It further averred that the purported registration of the said motor vehicle in the name of the plaintiff and Keng Services Limited was done fraudulently by the plaintiff and/or its agents, the Directors of Keng Services Limited and/or their servants, and officials at the office of the Registrar of motor vehicles. The defendant contended that it repossessed motor vehicle registration number KBC 545S pursuant to the powers conferred on it by a debenture dated 17th July, 2009 and registered on 29th July, 2009.
5. The defendant in its counter-claim averred that it created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs.3,000,000/= advanced to Keng Services Limited and guaranteed by Susan Kerubo Bigingi and Gilbert Gichana Nyamwocha. It further averred that the 3rd & 4th defendants in the counter-claim are Directors of the 2nd defendant in the counter-claim and that they executed a deed of guarantee and indemnity in respect of the debenture dated 17th July 2009 guaranteeing the payment of Kshs. 3,000,000/=, together with costs and interest.
6. It was stated by the defendant that the 2nd defendant in the counter-claim has defaulted in making payments to clear its indebtedness to the defendant, thus as at 30th October, 2013, the said debt stood at Kshs.6,769,789.40 which amount continues to attract interest at the rate of 27.5% per annum. In view of the above, the defendant asserted that the charge over the said motor vehicle by the defendant ranks in priority over all other claims.
7. The defendant prays for the plaintiff’s suit to be dismissed with costs and for judgment in the counter-claim to be entered in its favour against the defendants for –
i) A declaration that Keng Services Limited is the legal and registered owner of motor vehicle registration No. KBC 545S and that the debenture created over the same motor vehicle in favour of the defendant has first and paramount priority over all other claims over the said motor vehicle;
ii) A declaration that the purported transfer of motor vehicle registration No. KBC 545S from Keng Services Limited to the joint names of the plaintiff and Keng Services Limited was procured fraudulently and is null and void;
iii) Payment of the sum of Kshs.6,769,789.40 together with interest at 27.5% per annum or at such other rate as the plaintiff in the counter-claim may in its sole and absolute discretion from time to time determine from 30th October, 2013 until payment in full against the 2nd, 3rd & 4th defendants jointly and severally; and
iv) Costs of this counter-claim.
8. The plaintiff filed a defence to the defendant’s counter-claim where it denied all the averments contained in the said counter-claim and averred that as at 17th June, 2009, it was already a registered owner of motor vehicle registration number KBC 545S, hence Keng Services Limited had no capacity to create a charge over it in favour of the defendant. Thus, if at all there was fraud, it was on the part of the defendant when the debenture in its favour was created, but it did not impeach the validity of the plaintiff’s title. The plaintiff further averred that it was legally entitled to repossess motor vehicle registration number KBC 545S from Keng Services Limited and hire the same to Malison Transporters Limited by virtue of being the actual owner of the said motor vehicle.
9. The 5th defendant in the counter-claim filed a statement of defence dated 29th June, 2018 where it denied all the averments contained in the defendant’s counter-claim and averred that it is a public body established in accordance with Section 3 of the National Transport & Safety Authority Act with the statutory functions of inter alia to advise and make recommendations to the Cabinet Secretary on matters relating to road transport and safety, implement policies relating to road transport and safety; plan, manage, and regulate the road transport system, ensure the provision of safe, reliable and efficient road transport services and most importantly, to administer the Traffic Act, Chapter 403 Laws of Kenya.
10. The 5th defendant stated that the amended counter-claim does not relate to its mandate, as it is a private dispute between the plaintiff and the 1st to 4th defendants in the counter-claim in relation to a debenture over motor vehicle registration No. KBC 545S allegedly charged as security for a sum of Kshs.3,000,000/=, which issue, the 5th defendant is not privy to. It contended that the suit against it by the defendant (now plaintiff in the counter-claim) does not disclose a reasonable cause of action against it.
11. This matter proceeded to hearing where the plaintiff called one witness in support of its case, and the defendant also called on witness to ventilate its case.
PLAINTIFF’S CASE.
12. Mr. Lwanga Mwangi testified as PW1. He stated that he is a Debt Recovery Officer at Diamond Trust Bank of Kenya Limited and his duties include monitoring loan payments, undertaking recovery of facilities in default, reporting on loan portfolio performance, negotiating settlement with defaulting debtors and reviewing securities. He testified that pursuant to a letter of offer dated 11th July, 2008, the plaintiff agreed to finance the purchase of a used Scania Prime Mover registration number KBC 545S by Keng Services Limited on hire purchase terms from Kenya Garage Vehicle Industries Limited. That thereafter, the plaintiff and Keng Services Limited executed a Hire Purchase Agreement No. 008HPLC082050004 dated 22nd July, 2008. He further testified that vide a letter of offer dated 14th August, 2008, the plaintiff agreed to advance financial facilities to Mr. Gilbert Gichana Nyamwocha, a Director of Keng Services for the purchase of a new motor vehicle being a Shenzen trailer registration number ZC 9200 on hire purchase terms.
13. PW1 testified that subsequently, the plaintiff and Mr. Gilbert Gichana Nyamwocha executed a Hire Purchase Agreement No. 008HPLC082560003 dated 11th September, 2008. It was PW1’s evidence that it was a term of both Hire Purchase Agreements inter alia that the financed vehicles would be registered in the joint names of the bank and the customers as security for the hire purchase facility, and the log books for the aforesaid vehicles together with duly executed blank transfer forms for the same would be lodged with the bank for safe custody. He stated that it was also agreed that in the event of default and/or breach of the terms of the hire purchase facilities, the bank would be at liberty to terminate the same and repossess and/or sell the motor vehicles to recover its facility.
14. PW1 testified that both Keng Services Limited and Gilbert Gichana Nyamwoncha defaulted on their respective facilities, and the bank exercised its right pursuant to the respective hire purchase agreements, repossessed and sold the aforesaid motor vehicles to Malison Transporters Company Limited sometime in September 2010. Consequently, vide a letter of offer dated 9th September, 2010 the plaintiff agreed to finance Malison Transporters Company Limited for the purchase of the suit motor vehicles on hire purchase terms. Thereafter, the plaintiff and Malison Transporters Company Limited executed a hire purchase agreement No. 008HPLC102670002 dated 20th September, 2010 under the same terms as the hire purchase facilities granted to Keng Services Limited.
15. Mr. Mwangi testified that in a letter dated 31st January, 2011, the plaintiff was informed by Malison Transporters Company Limited that while transporting a customer’s goods, the defendant had repossessed the suit motor vehicle. He stated that the plaintiff’s Advocates on record under the instructions of the plaintiff issued a demand letter date 1st February, 2011 to the defendant, demanding immediate release of the suit motor vehicles. That the defendant’s Advocates in a letter dated 5th February, 2011 responded to the said letter stating that Keng Services Limited had by way of a debenture dated 17th July, 2009 charged the suit motor vehicles in favour of the defendant. Attached to that letter was a copy of the said debenture and a duplicate log book apparently issued by the Registrar of motor vehicles showing the defendant and Keng Services Limited as joint registered owners of the suit motor vehicles.
16. PW1 asserted that from the documents produced by the defendant, it is clear that the hire purchase facility extended by the plaintiff to Keng Services Limited was registered before the alleged debenture in favour of the defendant and since registration confers interest, the plaintiff enjoys priority over any other subsequent interest over the said motor vehicle. Further, that as at 17th July, 2009, Keng Services Limited had no right to charge motor vehicle registration No. KBC 545S as the same was jointly registered in its name and that of the plaintiff, and the bank neither discharged the said vehicle nor consented to any subsequent charge over it. Mr. Mwangi stated that in the premise, the defendant had not disclosed any legal or equitable interest in the suit motor vehicles that would entitle it to repossess them.
17. In cross-examination, PW1 stated that at the time it financed Keng Services Limited to purchase motor vehicle registration No. KBC 545S, the said vehicle was registered in the name of Kenya Garage Vehicle Industries Limited. He further stated that whether or not the said vehicle was in the name of the said dealer, it still had a right to dispose of it. He contended that the Hire Purchase Agreement between the plaintiff and Keng Services Limited seems not to have been registered, but confirmed that after entering into the said agreement, motor vehicle registration No. KBC 545S was registered jointly in the name of the plaintiff and Keng Services Limited. He stated that in as much as he had testified that the aforementioned motor vehicle was registered in the name of another person before it was transferred to the plaintiff and the 2nd defendant’s name in the counter-claim, he had no evidence of the transfer document in Court.
18. PW1 stated that at page 110 of the defendant’s documents, there is a log book in the name of Keng Services Limited which indicates that the registration date was 16th July, 2008 and there were no previous owners. That the said log book further shows that motor vehicle registration No. KBC 545S was imported from the United Kingdom. He averred that he could not explain how the plaintiff entered into an agreement with Keng Services Limited to purchase a vehicle that was already owned by the said company, however at pages 64 & 65 of the plaintiff’s documents, it was clear that as at 23rd July, 2008 & 30th August, 2008, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. PW1 denied that the plaintiff fraudulently had motor vehicle registration No. KBC 545S registered in joint names.
19. Mr. Mwangi averred that he did not have any documents to show when motor vehicle registration No. KBC 545S was repossessed by the plaintiff. He explained that after repossessing a vehicle from a defaulter, it is sold either by private treaty or auction, but in this case he did not know how the vehicle was sold to Malison Transporters Company Limited.
20. PW1 denied that Keng Services Limited was the owner of motor vehicle registration No. KBC 545S when it took a facility from the defendant and stated that the defendant created a debenture over the said motor vehicle without knowledge that it was already charged to the plaintiff. He confirmed that the said vehicle was released to the plaintiff on the understanding that it would be liable to pay any damages suffered by the defendant as a result of the said release. PW1 asserted that the plaintiff properly financed motor vehicle registration No. KBC 545S, thus it was not liable to pay the defendant.
21. In re-examination, PW1 stated that the Hire Purchase Act provides for registration of Hire Purchase Agreements for companies. He further stated that Kenya Garage Vehicle Industries Limited signed a dealer’s vehicle invoice and the plaintiff paid the dealer. He contended that the issue of repossession of the suit motor vehicle from Keng Services Limited is not an issue before this Court.
DEFENDANT’S CASE.
22. Rose Wangechi Kariuki testified as DWI. She stated that she is a Credit Officer at the defendant bank, in Nakuru branch. She explained that in that capacity she receives applications for bank facilities, monitors loan repayments, undertakes recoveries, reports on loan portfolio performance to Head Office, negotiates settlement with defaulting debtors, and reviews securities on their due dates. DW1 testified that Esther Kerubo Bigingi and Gilbert Gichana Nyamwocha as Directors of Keng Services Limited, which company has an account with the defendant bank, applied for an overdraft facility of Kshs.3,000,000/= on or about 15th June, 2011 and offered motor vehicle registration number KBC 545S as security by a letter of the same day. That Keng Services Limited then forwarded to the defendant log book number R02595232 and a Valuation Report for the said motor vehicle.
23. She testified that the aforesaid application was approved vide a letter dated 26th June, 2009 and the defendant agreed to make the facilities requested available subject to the defendant’s general terms and conditions. That Keng Services Limited accepted the offer by the defendant and the following securities were to be held by the defendant: Specific Debenture RSC Kshs.3,000,000/= over 2 motor vehicles, a truck KBC 545S Prime Mover, with CMV Kshs.3.49 Million and a Mercedes Benz KAU 797Y, with a CMV Kshs.1.5 Million; Personal Guarantees by the Directors Gilbert Gichana Nyamwocha & Susan Kerubo Bigingi for Kshs.3,000,000/= each, signed and witnessed by their Advocates; Company resolution authorizing the borrowing of Kshs.3,000,000/= & requesting the Directors to guarantee repayment of the facilities.
24. DW1 asserted that thereafter, the Directors of Keng Services Limited forwarded to them the certificate of incorporation, Memorandum and Articles of Association of the company, PIN Certificate for the company, a copy of a letter dated 3rd July, 2009 from the Registrar of Companies confirming the Directors and shareholding of the company, and a resolution by the company to borrow and give security. She stated that the defendant’s Advocate then prepared and registered a debenture and a deed of guarantee, and a certificate of registration of mortgage was forwarded to them.
25. DW1 stated that unfortunately, Keng Services Limited defaulted in making repayment causing the defendant’s Advocates to demand the amount due but there was no response from Keng Services limited. As a result, the defendant was forced to exercise the powers conferred on it by the debenture to authorize the repossession of motor vehicle registration number KBC 545S.
26. DW1 testified that after the said vehicle had been repossessed, the defendant received a demand letter dated 1st February, 2011, from the plaintiff claiming ownership of the said motor vehicle. That the defendant’s Advocates on record responded to the said letter vide a letter dated 5th February, 2011 which letter was further responded to by the plaintiff through letters dated 10th & 11th February, 2011. She further testified that on perusal of the documents attached to the plaintiff’s letters, they noted that motor vehicle registration number KBC 545S was first registered on 16th July, 2008 in the name of Keng Services limited and logbook number R02595232Z was issued on 28th July, 2008.
27. DW1 stated that in as much as a copy of records was issued by the Registrar of Motor Vehicles indicating that the said motor vehicle was jointly registered in the same name of the plaintiff and Keng Services Limited, no log book to that effect had been provided by the plaintiff. Further, that logbook number R0951759J issued in the joint names of the plaintiff and Malison Transport Company Limited shows that there is only one previous owner of the said motor vehicle.
28. As a result of the foregoing, DW1 contended that they concluded that there was fraud involved in the issues regarding the registration of the said motor vehicle, thus their Advocates on record reported the matter to the Banking Fraud Investigations Department through a letter dated 15th February, 2011. DW1 asserted that this is a clear case of the plaintiff in collusion with Keng Services Limited and the Registrar of Motor Vehicles trying to hide the true picture of the ownership of the motor vehicle in question, with a view of frustrating the efforts of the Bank (defendant) in recovering the monies advanced to Keng Services Limited and properly secured by a debenture over motor vehicle Registration number KBC 545S which now stands at Kshs.6,769,789.40 and it continues to accrue interest at 13% per annum.
29. During cross-examination, DW1 stated that she is not aware if the defendant noted that the logbook provided by Keng Services Limited was a duplicate logbook. She further stated that the defendant was to register a debenture with the Registrar of Companies to show that there is a charge. DW1 admitted that the defendant did not do a search with the Registrar of Motor Vehicles when Keng Services Limited offered motor vehicle registration No. KBC 545S as security for a financial facility advanced to it by the defendant, hence the defendant did not know whether the said motor vehicle had been registered in the name of another entity. She confirmed that Keng Services Limited applied for an overdraft facility on 15th June, 2009 and not 15th June, 2011. She also confirmed that the log book of the said motor vehicle availed by Keng Services Limited was a duplicate.
30. DW1 stated that the log book at page 11 of the plaintiff’s initial bundle of documents shows that it is an original log book, whereas the one at page 8 of the defendant’s bundle of documents indicates that it is a duplicate logbook. Further the number on the original logbook is different from the number on the duplicate log book. She confirmed that the plaintiff’s offer letter to Keng Services Limited was written before the defendant’s offer letter and the defendant had not produced a log book showing joint registration of motor vehicle registration No. KBC 545S with Keng Services Limited. DW1 confirmed that the defendant had not produced a statement of accounts for Keng Services Limited.
31. In re-examination, DW1 stated that at page 91 of the defendant’s documents is a demand letter dated 13th July, 2010 showing the amount due to the defendant from Keng Services Limited as Kshs.3,161,390/=.
32. At the close of the defendant’s case, the Court closed the 5th defendant’s case in the counter-claim in view of the fact that Counsel who was holding brief for Mr. Ochieng, learned Counsel for the 5th defendant, walked out of Court when the Court directed that the case would proceed to hearing. The Court then directed parties to file written submissions. The plaintiff’s submissions were filed on 7th July, 2023 by the law firm of Madhani Advocates LLP, and the 5th defendant’s submissions were filed by the law firm of Prof. Albert Mumma & Company Advocates on 28th August, 2023. The defendant in the main suit did not file any written submissions despite having been given additional time to do so by this Court.
33. Mr. Shah, learned Counsel for the plaintiff submitted that the defendant has only addressed itself to motor vehicle registration No. KBC 545S and has not made any claim either through its pleadings or at the hearing of the main suit in relation to the trailer registration No. ZC 9200. For this reason, the plaintiff’s claims in relation to the trailer registration No. ZC 9200 are uncontroverted and therefore ought to be allowed as prayed.
34. Counsel referred to clause 8 of the Hire Purchase Agreements between the plaintiff and Keng Services Limited on the one hand, and the plaintiff and Gilbert Gichana Nyamwocha on the other hand, and submitted that by virtue of the said agreements, the plaintiff is the proper owner of the suit motor vehicles, whereas Keng Services Limited was a mere bailee who did not have proper title to dispose of or use the suit motor vehicles as security for the overdraft facility obtained from Oriental Commercial Bank (defendant). To buttress this submission, Counsel relied on the Black’s Law Dictionary definition of a Bailee.
35. He relied on the case of Joseph Hinga & 2 others v Joseph Tirop [2022] eKLR, where the Court expounded on the principle of Nemo Dat Quod Non Habet, the case of Merit Development Limited v Lenana Investment Limited & 2 others [2018] eKLR and clause 2(i) of the Hire Purchase Agreements and contended that there is no evidence that Keng Services Limited sought the plaintiff’s authority to use motor vehicle registration No. KBC 545S as security to procure an overdraft facility from the defendant. He stated that as a result, the transaction between Keng Services Limited and the defendant is void ab initio.
36. In submitting that the plaintiff’s proprietary interests in the suit vehicles cannot be diminished by the transaction between Keng Services Limited and the defendant. He contended that the defendant cannot purport to make a claim for the suit motor vehicles on account of a security that was not valid. He referred to the case of Daniel Kiprugut Maiywa v Rebecca Chegkurgat Maina [2019] eKLR.
37. Mr. Shah cited the provisions of Section 3(1) of the Hire Purchase Act and the Court of Appeal cases of Diamond Trust Bank Kenya Limited (Formerly Diamond Trust of Kenya Limited) v Jaswinder Singh Enterprises [1999] eKLR and Taawawa Supermarket Limited v Fina Bank Ltd [2010] eKLR and asserted that the issue of whether or not the Hire Purchase Agreements herein were registered has no bearing and/or effect on this case since the provisions of the Hire Purchase Act were not contemplated to apply to body corporates. He argued that the issue of whether the plaintiff’s repossession of the financed motor vehicles is illegal was never an issue before this Court since Keng Services Limited never objected to the said repossession. He stated that the above notwithstanding, the plaintiff was mandated under clause 4 of the Hire Purchase Agreements to repossess the financed motor vehicles in the event of default by the hirer.
38. Counsel for the plaintiff referred to the provisions of Section 8 of the Traffic Act and the Court of Appeal case of Joel Muga Opinja v East Africa Sea Food Ltd [2013] eKLR and stated that in view of the copy of records from the Registrar of Motor Vehicles showing ownership as at 23rd July, 2008 and the log book showing ownership as at 10th September, 2008, the plaintiff is the proper owner of the suit motor vehicles. This is because, an official search of records from the Registrar of Motor Vehicles is prima facie evidence of joint ownership. Mr. Shah further stated that the only reason Keng Services Limited was named in the ownership records of motor vehicle registration No. KBC 545S as contended by the defendant, is because of it being financed to purchase it by the plaintiff.
39. Counsel for the plaintiff relied on the case of R.G. Patel v Lalji Maknji [1962] EA cited with approval in the case of Ndege Kabibi Kimanga & another v Karinga Gaciani & 12 others [2016] eKLR and argued that allegations of fraud must be strictly proved, but in this case the defendant has made allegations that the registration of motor vehicle registration number KBC 545S in the joint names of the plaintiff and Keng Services Limited was procured by fraud, but has not produced any evidence in support of this allegation. He submitted that the plaintiff has demonstrated to the Court the due procedure and processes that led to the registration of the suit vehicles in its name.
40. Mr. Shah referred to the Court of Appeal case of Savings & Loan (K) Limited v Kanyenje Karangaita Gakombe & another [2015] eKLR, on privity of contract and contended that the plaintiff is a stranger to the letter of offer issued to Keng Services Limited by the defendant and the terms and the obligations therein, thus it cannot be liable to pay the amounts claimed by the defendant. He relied on the case of Gulf African Bank Limited v Atticon Limited & 4 others (Comm. Case No. 086 of 2019) and submitted that since the defendant without conducting a motor vehicle search proceeded to issue an overdraft facility to Keng Services Limited, with motor vehicle registration No. KBC 5453 as security for the said facility, any loss occasioned by the defendant’s negligence in conducting proper due diligence should be borne by the defendant.
41. It was stated by Counsel that the plaintiff having demonstrated that it has bona fide proprietary interest of motor vehicle registration No. KBC 545S and trailer registration No. ZC 9200, a permanent injunction should issue against the defendant barring it from interfering with its ownership over the suit motor vehicles. To this end, Mr. Shah relied on the case of Kenya Power & Lighting Co. Limited v Sheriff Molana Habib [2018] eKLR. He further relied on the case of Peter Muriuki Ngure v Equity Bank (K) Ltd [2018] and asserted that the plaintiff should be awarded costs of this suit.
42. Mr. Ochieng, learned Counsel for the 5th defendant submitted that the defendant confirmed that it did not undertake any search or engage in any form of due diligence to confirm that motor vehicle registration number KBC 545S indeed belonged to Keng Services Limited, thus establishing its suitability as collateral for ensuring the repayment of the loan extended to Keng Services Limited. He referred to the provisions of Section 5 of the Traffic Act and asserted that the defendant had a reasonable obligation to conduct due diligence on motor vehicle motor vehicle registration number KBC 545S, which would have revealed that it was jointly owned by Keng Services Limited and Diamond Trust Bank Limited, hence it was not a suitable collateral for ensuring repayment of the loan extended to Keng Services Limited by the Oriental Commercial Bank (defendant).
43. Mr. Ochieng stated that the logbook presented to the defendant by Keng Services Limited served as prima facie evidence of ownership of motor vehicle registration number KBC 545S, but it was still incumbent upon the defendant to conduct proper due diligence and perform a search in accordance with Section 5 of the Traffic Act to confirm and establish that Keng Services Limited was the rightful owner of motor vehicle registration number KBC 545S before attempting to use it the vehicle as collateral for the loan. He submitted that such due diligence would have revealed that motor vehicle registration number KBC 545S was jointly owned by both Keng Services Limited and Diamond Trust Bank Limited, thus it was not a suitable collateral for ensuring the repayment of the loan extended to Keng Services Limited.
44. Counsel further submitted that the defendant cannot hold the 5th defendant accountable for the failure to conduct due diligence and establish the appropriateness of the vehicle as collateral for the overdraft facility. Mr. Ochieng relied on the Court of Appeal case of Samuel Kamere v Lands Registrar, Kajiado [2015] eKLR to buttress his argument.
45. He stated that the defendant in its counter-claim has not made any specific allegations against the 5th defendant related to any act or omission that would be in violation of the provisions of the Traffic Act or the National Transport and Safety Authority Act, No. 33 of 2012, and in the absence of a legal and/or factual dispute between the defendant and the 5th defendant, the 5th defendant was not a necessary party in these proceedings. He also stated that there is no indication in the said counter-claim that the 5th defendant negligently failed to fulfill any of its duties, thus giving rise to a cause of action for which it could be held liable for any of the remedies sought in the counter-claim.
ANALYSIS AND DETERMINATION.
46. I have considered and analyzed the evidence adduced in Court, the pleadings filed, alongside the written submissions by Counsel for the plaintiff and the 5th defendant. The issues that arise for determination are -
i) Who has bonafide proprietary interest in the suit motor vehicles?;
ii) Whether the log book of motor vehicle registration Number KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited;
iii) Whether the 2nd, 3rd, & 4th defendants in the counter-claim are liable to the defendant in the main suit in the sum of Kshs.6,769,789.40; and
iv) Whether the plaintiff is entitled to an order of permanent injunction.
47. Before I delve into the merits and demerits of this suit, it is worth noting that the 2nd, 3rd & 4th defendants in the counter-claim never participated in these proceedings despite service of the pleadings on them. The defendant in the main suit vide a request for judgment dated 6th May, 2014 attempted to have interlocutory judgment for the sum of Kshs.6,769,789.40 entered against them for failure to enter appearance. The Court on 13th August, 2014 sought clarification on whether leave to serve by substituted service was ever granted. From the record, there is no evidence of the aforementioned request for judgment ever being endorsed, or interlocutory judgment being entered against the 2nd, 3rd & 4th defendants in the counter-claim as sought by the defendant in the main suit.
Who has bonafide proprietary interest in the suit motor vehicles.
Trailer registration No. ZC 9200
48. The plaintiff has demonstrated that it indeed financed the purchase of trailer registration No. ZC 9200 by Gilbert Gichana Nyamwocha by way of a letter dated 14th August, 2008. This is evidenced by a Hire Purchase Agreement between it and Gilbert Gichana Nyamwocha dated 11th September, 2008, a copy of statements of accounts for the hire purchase facility extended to Gilbert Gichana Nyamwocha, and a copy of the original logbook of the said trailer which shows that it was registered in the joint names of the plaintiff and Gilbert Gichana Nyamwocha. The plaintiff has also demonstrated that the defendant in the main suit defaulted in its loan repayment obligations and as a result, it repossessed trailer registration No. ZC 9200 and sold it to Malison Transporters vide a letter of offer dated 9th September, 2010. A Hire Purchase Agreement between the plaintiff and Malison Transporters Company Limited dated 20th September, 2010, and a copy of the original logbook for the said trailer registered in the joint names of the plaintiff and Malison Transporters Company Limited were produced in evidence.
49. It is noteworthy from the defendant’s pleadings and evidence before this Court that the defendant has no demonstrable proprietary interest and/or claim over trailer registration No. ZC 9200. For this reason and in light of the foregoing, this Court finds that the plaintiff has a bonafide proprietary interest in the said trailer and the defendant has none.
Motor vehicle registration No. KBC 545S.
50. In order to determine the question of who between the plaintiff and the defendant in the main suit has bonafide proprietary interest in motor vehicle registration number KBC 545S, it has to determine who was the rightful and/or legal owner of the said vehicle at the time it was offered as security to the defendant in the main suit. It is not disputed that the plaintiff vide a letter of offer and Hire Purchase Agreement dated 11th July, 2008 and 22nd July, 2008 respectively, financed the purchase of a Scania Prime Mover registration number KBC 545S by Keng Services Limited on hire purchase terms from Kenya Garage Vehicle Industries Limited. It is also not disputed that the defendant created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs. 3,000,000/= advanced to Keng Services Limited and guaranteed by Susan Kerubo Bigingi and Gilbert Gichana Nyamwocha sometime in June 2009.
51. The defendant contended that since the said motor vehicle was registered solely in the name of Keng Services Limited, the said company had every right to offer motor vehicle registration number KBC 545S to the defendant as security for a financial facility advanced to it. The plaintiff on the other hand submitted that as at June 2009, motor vehicle registration number KBC 545S was registered in the names of both the plaintiff and Keng Services Limited, thus the said company had no right to offer the said motor vehicle as security to the defendant without the plaintiff’s consent.
52. It is evident from the record that as at 16th July, 2008, motor vehicle registration number KBC 545S was registered solely in the name of Keng Services Limited as can be seen from the original log book of the said motor vehicle issued on 28th July, 2008, found at page 11 of the plaintiff’s bundle of documents filed on 17th February, 2011. It is now well settled that the presumption of ownership arising out of the production of a title document is the best evidence prima facie to demonstrate one’s ownership rights. The said presumption is however not absolute and may be rebutted based on the facts of a case and the evidence produced. In this case, the plaintiff produced copies of records from the Registrar of Motor Vehicles found at pages 64, 65, & 66 of its bundle of documents filed on 10th September, 2018 showing that as at 23rd July, 2008, 30th August, 2008, and 18th September, 2010, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. To this end, I am bound by the Court of Appeal’s holding in the case of Joel Muga Opinja v East Africa Sea Food Ltd [2013] eKLR, where it was held as follows-
“We agree that the best way to prove ownership would be to produce to the Court a document from Registrar of Motor Vehicles showing who the registered owner is ...”
53. The 5th defendant in its submissions stated that if the defendant had exercised due diligence and carried out a search of motor vehicle registration No. KBC 545S at the Registrar of Motor Vehicles, it would have established that the said vehicle was jointly owned by both Keng Services Limited and Diamond Trust Bank Limited (plaintiff) and was as such not a suitable collateral for securing the repayment of the loan extended to Keng Services Limited.
54. In the circumstance, this Court is satisfied by the evidence adduced that as at June 2009, motor vehicle registration No. KBC 545S was registered in the name of the plaintiff and Keng Services Limited. As a result, before Keng Services Limited could use the said motor vehicle for any other purpose other than that which it was contained in the Hire Purchase Agreement, and/or before charging it to another institution to secure financial facilities, it ought to have first sought the consent of the plaintiff. It is not disputed that as at the time Keng Services Limited was offering motor vehicle registration No. KBC 545S as security to the defendant, it had not fully repaid the plaintiff. For this reason, the provisions under Clause 2(l) & 8 of the Hire Purchase Agreement dated 22nd July, 2008 were still in force. They state as hereunder-
“Clause 2 (l)
not to allow the vehicle to pass out of his custody or control nor to sell, assign, pledge, mortgage, under/at, lend or part with possession of the vehicle/ Goods nor in any way deal or dispose or attempt to dispose of the Vehicle/ Goods or any part of his interest therein nor represent himself to be not to do or suffer to be done anything whereby he may be reputed to be the owner of the Vehicle/ Goods; nor to take or send the Vehicle/ Goods or permit the some to be taken or sent out of Kenya.”
“Clause 8
Unless and until all sums due by the Hirer to the owner hereunder shall have been duly paid to the owner and the option contained in clause 6/b/ hereof shall have been exercised the Vehicle/Goods shall remain the absolute property of the Owner anal the Hirer shall have no light or interest to or in the same other than as a mere bailee thereof.”
55. In light of the above provisions, the plaintiff was to remain the absolute owner of motor vehicle registration No. KBC 545S. Keng Services Limited was to remain the hirer of the said motor vehicle, until it fully repaid its debt to the plaintiff. The plaintiff in this case relied on the principle of nemo dat quod non habet. The Court in the case of Daniel Kiprugut Maiywa v Rebecca Chepkurgat Maina (supra) addressed the said principle as follows -
"The nemo dat principle means one cannot give what he does not have. This principle is intended to protect the title of the true owner. The rationale behind this principle is that whoever owns the legal title to property holds the title thereto until he or she decides to transfer it to someone else. Accordingly, an unauthorized transfer of the title by any person other than the owner generally has no legal effect, which means the owner continues to hold the title to the property while the person who received the invalid title owns nothing. However, the law provides some exceptions to this rule in the following certain circumstances; For example where a person buys the property in good faith believing that the person who sold it to him was the owner or authorized agent of the owner; where the property is sold by a mercantile agent who is in possession of the goods or documents of title; sale by a joint owner who sells the property with the permission of the co-owner or sale by a person in possession of goods or property under a voidable contract.”
56. In this case, DW1 testified that when advancing the financial facility to Keng Services Limited, the said company supplied them with a copy of a duplicate log book for motor vehicle registration No. KBC 545S on whose strength the defendant created a debenture over motor vehicle registration number KBC 545S to secure a sum of Kshs.3,000,000/= advanced to Keng Services Limited. In cross-examination, DW1 confirmed that the defendant did not carry out a search to confirm that Keng Services Limited was the registered owner of the said motor vehicle. I do agree with Counsel for the plaintiff in the main suit and the 5th defendant in the counter-claim, that the defendant in the main suit had a duty to verify the ownership of motor vehicle registration No. KBC 545S by conducting a search at the Registrar of Motor Vehicles, before accepting the said vehicle as security for financial facilities extended to Keng Services Limited, even more so because what was supplied to it by Keng Services Limited was a duplicate log book and not an original log book. Failure to conduct due diligence by the defendant in the main suit amounts to negligence on its part.
57. As such, the defendant’s case in the main suit does not qualify as one of the exceptions to the principle of nemo dat quod non habet since the said defendant failed to exercise due diligence. Consequently, this Court finds that there was no way for the defendant to acquire a better title over motor vehicle registration No. KBC 545S than that of the plaintiff. It emerged from the evidence that the Hire Purchase Agreement between the plaintiff and Keng Services Limited was not registered, thus was null and void and had no legal effect. Section 3 (1) of the Hire Purchase Act provides that –
“This Act applies to and in respect of all hire-purchase agreements entered into after the commencement of this Act under which the hire-purchase price does not exceed the sum of four million shillings or such other higher or lower sum as the Cabinet Secretary may, after taking into account market forces from time to time prevailing, prescribe other than a hire-purchase agreement in which the hirer is a body corporate, wherever incorporated:
Provided that monetary limitation does not apply so as to affect the definition of "hire-purchase business" in section 2(1).
58. The Court of Appeal in the case of Taawawa Supermarket Limited v Fina Bank Ltd (supra) held that –
“A pertinent hypothetical question may be asked: why would an individual hirer take advantage of the Act to a limited extent when a body corporate would not be limited by any monetary threshold? No compelling reason presents itself to us and we find in the circumstances that the intention of Parliament was to exclude purchases made by co-operative societies and registered companies from the operation of the Act, and not merely to remove the monetary threshold for corporations. With that finding, the issue of registration of the agreement under section 5 (1) does not arise…”
59. It is noteworthy that the Hire Purchase agreement in question which is dated 22nd July, 2008 is between the plaintiff and Keng Services Limited which is a body corporate and/or a registered company. For this reason, the issue of registration does not arise.
60. In the premise, this Court finds that the plaintiff has a bonafide proprietary interest in motor vehicle registration No. KBC 545S, whereas the defendant has none.
Whether the log book for motor vehicle registration Number KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited.
61. It is trite law that allegations of fraud must be strictly pleaded and proved. The Court of Appeal in the case of Jephther O. Opande v Mary Atemo Gathiriga [2019] eKLR cited with authority the case of Vijay Morjaria v Nansing Darbar & another [2000] eKLR where it was stated that –
“It is well established that fraud must be specifically pleaded and that particulars of the fraud must be stated on the face of the pleadings. The acts alleged to be fraudulent must of course be set out and then it should be stated that those acts were done fraudulently. It is also settled law that fraudulent conduct must be distinctly alleged and as distinctly proved and it is not allowable to leave fraud to be inferred from the acts.”
62. In this case, the defendant has not demonstrated and/or tendered any evidence in support of the allegation that the log book for motor vehicle registration No. KBC 545S was fraudulently transferred to the name of the plaintiff and Keng Services Limited.
63. As a result of the foregoing, this Court finds that the log book for motor vehicle registration Number KBC 545S was not fraudulently transferred to the name of the plaintiff and Keng Services Limited. To the contrary, the said transfer was legal and above board.
Whether the 2nd, 3rd & 4th defendants in the counter-claim are liable to the defendant in the main suit in the sum of Kshs.6,769,789.40.
64. In support of the allegation that the defendant advanced Kshs.3,000,000/= to the 2nd defendant in the counter-claim, which loan was guaranteed by the 3rd and 4th defendants in the counter-claim , the defendant in the main suit produced before this Court a letter of offer dated 26th June, 2009 issued to Keng Services Limited for an overdraft facility of Kshs. 3,000,000/=, a deed of guarantee and indemnity between the defendant in the main suit and the 3rd and 4th defendants in the counter-claim dated 17th July, 2009 where the 3rd and 4th defendants in the counter-claim guaranteed to pay to the defendant in the main suit any monies that shall be due and owing to the defendant in the main suit by the 2nd defendant in the counter-claim, and a debenture dated 17th July, 2009 for Kshs.3,000,000/= by the 2nd defendant in the counter-claim in favour of the defendant in the main suit.
65. As explained earlier on in this judgment, the 2nd, 3rd & 4th defendants in the counter-claim did not participate in these proceedings thus the defendant’s evidence that it advanced Kshs.3,000,000/= to the 2nd defendant in the counter-claim, which loan was guaranteed by the 3rd and 4th defendants in the counter-claim remains uncontroverted. The defendant’s claim against the 2nd, 3rd & 4th defendants in the counter-claim is for special damages. It is trite law that special damages must be specifically pleaded and strictly proved. Furthermore, Sections, 107, 108 & 109 of the Evidence Act provide that he who alleges must prove. The Court of Appeal in the case of Jogoo Kimakia Bus Services Ltd v Electrocom International Ltd [1992] KLR 177 defined what constitutes special damages as follows: -
“Special damages are the precise amount of pecuniary loss which the claimant can prove to have followed from the particular facts set out in the pleadings. They must be specifically pleaded.”
66. The defendant in the main suit averred that the 2nd defendant defaulted in its loan repayment, and that the loan due to it by the 2nd defendant now stands at Kshs. 6,769,789.40 and it continues to accrue interest at 13% per annum. It did not produce any evidence such as a loan account statement for the 2nd defendant in the counter-claim, to support the said allegation. All that was produced by the defendant in the main suit as proof of the said debt are demand letters written by its Advocate on record and addressed to the 2nd, 3rd & 4th defendants in the counter-claim. This in my view is not sufficient proof of the aforementioned debt.
67. I am not persuaded that the 2nd, 3rd & 4th defendants in the counter-claim are indebted to the defendant in the main suit in the sum of Kshs.6,769,789.40.
Whether the plaintiff is entitled to an order of permanent injunction.
68. Permanent Injunctions are perpetual in nature and are generally issued after a suit has been heard and finally determined. A permanent injunction is an equitable remedy. The Court in the case of Bandari Investments & Co. Ltd v Martin Chiponda & 139 others [2022] eKLR held as follows with respect to permanent injunctions -
“Permanent Injunction fully determines the right of the Parties before the Court and is normally meant to perpetually restrain the commission of an act by the Plaintiff in order for the rights of the Plaintiff to be protected. This Court has the powers to grant the Permanent Injunction under Sections 1A, 3 & 3 A of the Civil Procedure Code, 2010 if it feels the right of a Party has been fringed, violated and/or threatened as the Court cannot just sit, wait and watch under these given circumstances…’’
69. In the end, this Court finds that the plaintiff is entitled to an order of permanent injunction having demonstrated that it has a legal and/or bonafide proprietary interest in motor vehicle registration No. KBC 545S and trailer registration No. ZC 9200.
70. The upshot is that the plaintiff’s suit against the defendant in the main suit is merited, thus successful and the defendant’s counter-claim is not successful. Section 27 of the Civil Procedure Act provides that costs follow the event, therefore the plaintiff having succeeded in this suit is awarded costs of in the main suit and in the counter-claim.
71. In the circumstance I make the following orders: -
i) A permanent injunction is hereby issued barring the defendant in the main suit from ever obstructing or interfering with the plaintiff’s ownership of motor vehicle registration number KBC 545S and trailer registration number ZC 9200 through inter alia attaching, holding, possessing, charging, using, advertising for sale, selling by public auction or by private treaty and/or otherwise handling or dealing with motor vehicle registration number KBC 545S and trailer registration number ZC 9200 in any manner whatsoever on account of the debt owed to the defendant by its customer;
ii) The defendant’s counter-claim is hereby dismissed;
iii) Costs of the main suit are awarded to the plaintiff;
iv) Costs of the counter-claim are awarded to the 1st defendant (plaintiff in the main suit) and the 5th defendant (in the counter-claim).
It is so ordered.
DATED, SIGNED and DELIVERED at NAIROBI on this 3rd day of May, 2024. Judgment delivered through Microsoft Teams Online Platform.
NJOKI MWANGI
JUDGE
In the presence of:
No appearance for the plaintiff
No appearance for the defendant
Mr. Kimathi for the 5th defendant.