1. This appeal filed through an amended memorandum of appeal dated 8/7/2022 seeks that this court varies and/or sets aside the judgment of the magistrate’s court delivered on 10/6/2022 in which the appellant’s suit against the respondent (the bank) was dismissed with costs.
2. The appellant’s case as contained in his plaint dated 6/11/2019, his witness statement and testimony in court on 25/11/2021 was that he was a customer of the respondent and holder of account in the name of Philip Otieno JA A/C No. PDPD0829207540 at the respondent’s Oyugis branch in Homabay County.
He took a personal loan of KShs 200,000/= from the bank in May 2005 repayable by way of check-off system from his salary at the rate of KShs 7,475/= over a period of 36 months with an interest of 16% p.a. and a default rate of 3% p.a. for amounts in arrears and outstanding. He produced as exhibit Letter of offer dated 9/5/2005 titled KCB Personal Loan application – Moi Avenue branch of KShs 200,000/=.
3. According to the appellant, he dutifully serviced the loan as per the loan agreement and the loan was deducted last in May 2008. The bank issued him with a clearance letter after he made available all his pay slips to them to satisfy them the amounts had been duly deducted and paid to the bank. He produced the letter dated 10/12/2008 from the bank addressed to him under the address of Philip Otieno, KAA No. 374432, Ref. No. A/C 317679057012 with the content “We refer to the above and confirm that the loan facility in our books at Moi Avenue Branch has now been paid in full. We thank you for your cooperation shown during the loan tenure.” Signed by Rachel Mwangi, Manager, Personal Loans.
4. However, in a letter dated 7/11/2012, the bank wrote him a letter under Ref Loan Account No (PDPD0829207540) informing him that it was in arrears of KShs 71,463.82 as at 7/11/2012. The letter also referred to demand letters sent to the appellant dated 2/10/2012 and 8/8/2012. He was required to clear the arrears through account 11003911266 within 7 days. The letter further informed him that his name had been forwarded to the CRB where it would remain for the next 7 years from the time the debt is settled.
5. The appellant responded to the bank’s letter through his letter dated 29/1/2013 and informed the bank that his loan was settled in May 2008 and the bank had issued him with a certificate/letter of clearance.
6. In response, the bank on 25/2/2014, about a year later wrote to him asking him to make available documentary evidence including pay slips and the clearance letter to show that the loan was repaid in full. He supplied the documents requested to the bank. On 29/4/2014 the bank wrote him a letter advising that the issue had been finalized and they considered the debt repaid in full.
7. The appellant said in evidence that on 29/3/2019 he was surprised to find that the bank had deducted KShs 20,778.95 from the joint account No. 117631536 which he held with his wife under the name Philip Otieno JA without notice or consent of him or his wife. Despite numerous requests from him, the bank had failed to respond to the issue.
8. According to the appellant he incurred losses after the respondent without any reasonable or justifiable cause withdrew the KShs 20,778.95 from the appellant’s said joint account with his wife being A/C No. 117631536 under the name Philip Otieno JA. The appellant was thus denied the use of the said money which the respondent had received from him and has thus suffered economic loss. He produced a bank statement for account No. 1176315269 in the name Philip Otieno JA for the period 1/8/2016 to 4/6/2019 showing that on 29/3/2019 a sum of KShs 20,778.95 had been transferred out of the account.
9. The appellant further claimed that the actions of the respondent were actuated by malice as the respondent failed to make any demand of the debt and give him notice before referring him to the CRB and further that the respondent has continued to demand the debt when the respondent has on three occasions certified that it had been fully settled. It is the appellant’s case that the respondent’s actions were an abuse of power, privilege, trust and office.
10. The appellant therefore sought the following orders:
a) Special damages Kshs. 20,778.95
b) An order declaring the respondent’s action to refer the appellant’s name to the Credit Reference Bureau (CRB) to be reckless and unlawful and a further order directing that the respondent at its own cost to immediately withdraw the appellant’s name from the Credit Reference Bureau.
c) general and punitive damages.
d) costs of the suit.
e) any other/or further relief as the court shall deem fit to grant.
11. The appellant produced the various documents referred to above in support his case.
12. The respondent filed a statement of defence dated 8/1/2020 and denied the allegations by the appellant putting him to strict proof.
13. The respondent denied that there was a withdrawal made on 29/3/2019 and if the same was made it was lawful and in line with the terms and conditions of the account.
14. The respondent did not file a witness statement or any other documents. The respondent did not call a witness or tender any evidence at the hearing.
15. The learned trial magistrate, upon considering the evidence found that the bank statement produced by the appellant indeed confirmed that there was withdrawal but there was no evidence that the respondent withdrew the stated sum of money as alleged and that the appellant did not demonstrate that the withdrawal was not in line with the normal terms and conditions of the bank.
16. The learned trial magistrate also found that the allegation by the appellant that he had been listed with the CRB was not proved because on cross-examination he admitted that he did not have evidence to that effect.
17. Consequently, the learned trial magistrate found that the appellant had not proved his case against the respondent on a balance of probabilities and dismissed it.
18. Dissatisfied with that decision, the appellant filed the present appeal based on some 8 grounds. Ground No. 2 is incomplete while ground 7 appears to be misplaced. I have merged grounds 1, 5 with 6 as well as grounds 3 with 4 as in both cases they address the same issue. This makes 3 grounds as follows:
a. that the learned trial magistrate erred in law and in fact by dismissing the suit with costs without considering the evidence of the appellant or to give it weight.
b. that the learned trial magistrate erred in fact by failing to appreciate that the respondent did not act in the best interest of the appellant while operating the appellant’s account and that the respondent proceeded to operate the appellant’s account despite the appellant having fully repaid the loan advanced.
c. that in all circumstances of the case, the findings of the learned trial magistrate are insupportable in law or on the basis of the evidence adduced.
19. The appeal was disposed of by way of written submissions filed by learned counsels for both parties.
20. I have considered the parties pleadings, evidence and submissions.
21. This being a first appeal, the duty of the court is to re-evaluate, re-analyze and re-consider the evidence and draw its own conclusions, bearing in mind that it did not see witnesses testifying and therefore give due allowance for that. This is the position as held in Selle & another vs. Associated Motor Boat Co. Ltd & others [1968] E.A at page 126 on a first appeal from the High Court to the Court of Appeal that:
“An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this Court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this court is not bound necessarily to follow the trial judge’s findings of fact if it appears either that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence in the case generally (Abdul Hameed Saif v Ali Mohamed Sholan (1955), 22 E.A.C.A. 270)”.
22. Even though the respondent filed a defence denying the appellant’s claim, no witness was called to testify on behalf of the respondent to substantiate the averments in the statement of defence. Therefore, the evidence tendered by the appellant remained uncontroverted.
23. In the case of Edward Mariga through Stanley Mobisa Mariga v Nathaniel David Schulter & another [1997] eKLR, the Court of Appeal when considering the issue of a defendant’s failure to call evidence at the hearing observed that apart from filing the statement of defence the defendant did not adduce any evidence in support of assertions made therein. The evidence of the plaintiff and that of his witness remained uncontroverted and the statement in the defence that the Respondent (Plaintiff) had contributed to the accident therefore remained an allegation. That is the same position in the present case.
24. Indeed, Sections 107 and 108 of the Evidence Act are clear that he who asserts or pleads must support the same by way of evidence. The respondent has not supported its assertions as contained in the statement of defence denying that the appellant was its customer and also the monies were withdrawn procedurally. Indeed, learned counsel for the respondent submits that the appellant and the respondent had a customer-banker relationship.
25. That the appellant was a customer of the bank is clear from the uncontested evidence of the appellant. He produced various correspondences from the bank to prove that relationship.
26. The appellant’s case before the trial court was that the respondent was in breach of contract by causing to be withdrawn money from his joint account without his consent or that of his wife, the joint account holder and further submitting his name to the CRB for listing without good cause.
27. The burden to prove the case was upon the appellant. Section 107 of the Evidence Ac (Cap. 80) Laws of Kenyat provides that:
“Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist.”
28. Section 108 of the Evidence Act goes further to provide that, the burden of proof lies on the party who would lose if no evidence was provided before the court. Justice Mativo (as he then was) in Hellen Wangari Wangechi v Carumera Muthini Gathua [2005] eKLR referred to the decision of Lord Denning in Miller v Minister of Pensions [1942] 2 ALL ER 372 which states that:
“The … (standard of proof) … is well settled. It must carry a reasonable degree of probability…If the evidence is such that the tribunal can say ‘we think it more probable than not’ the burden is discharged, but if the probabilities are equal, it is not.”
“It is a well-established rule of evidence that whoever asserts a fact is under an obligation to prove it in order to succeed. As observed above, the Appellant made allegation in the plaint, hence she was under an obligation to support the allegation. For example, since there was a denial in the defence, it was necessary to adduce evidence to show how the amount of Kshs.316,000/- was arrived at.”
29. In the case of Re H (minors) sexual abuse; standard of proof {1996} AC 563 The House of Lords laid down a series of guiding principles on standard of proof as follows:
a) Where the matters in issue are facts, the standard of proof required in non-criminal proceedings is the preponderance of probability, usually referred to as the balance of probability.
b) The balance of probability standard means that the Court must be satisfied that the event in question is more likely than not to have occurred.
c) The balance of probability standard is a flexible standard. This means that when assessing this probability, the Court will assume that some things are inherently more likely than others.”
30. The standard of proof in civil cases was discussed in the Court of Appeal decision in Civil Appeal 15 of 2016, Samuel Ndegwa Waithaka v Agnes Wangui Mathenge & 2 others [2017] [eKLR]. The Court while referring to Lord Nicholls in the Case above observed that in civil cases such as this case, the standard of proof is on the balance of probabilities. This standard means that a court is satisfied that an event occurred if the court considers that, on the evidence, the occurrence of the event was more likely than not. In H (Minors) [1966] AC 563 at pg 586, Lord Nicholls explained that the test on the balance of probabilities was flexible. The learned Judge said,
“When assessing the probabilities, the court will have in mind as a factor, to whatever extent is appropriate in the particular case, that the more serious the allegation, the less likely it is that the event occurred and, hence, the stronger should be the evidence before the court concludes that the allegation is established on the balance of probability.”
31. The appellant presented evidence showing his repayment of the loan, letters from the bank confirming the full repayment of the loan. This was in response to the bank’s demands indicating that he was yet to clear the loan. He also presented a letter from the bank telling him that his name had been forwarded to the CRB for listing as a loan defaulter.
21. The appellant gave evidence that no demand letter was sent to him and indeed the bank has not produced any demand letter sent to the appellant before the matter was referred to the CRB. The bank did not produce a statement of account for the appellant to show his indebtedness to it. But the fact of the loan being repaid in full was acknowledged by the bank twice in its letters to the appellant. It could only have made those acknowledgements upon checking the appellant’s bank statement in its possession.
22. Learned counsel for the respondent submits that the appellant did not adduce evidence to show that the bank withdrew the KShs 20,778/95 from his account and that it was not done in line with the terms and conditions of their contractual relationship.
23. But, the information on the operations of the appellant’s account with the bank would best be known by the bank as the custodian of the bank statement. Section 112 of the Evidence Act on proof of special knowledge in civil proceedings provides that:
“In civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him.”
24. In the case of Kenya Akiba Micro Financing Limited v. Ezekiel Chebii & 14 others [2012] eKLR the court after considering the above provision of the law stated as follows:
“Where a party has custody or is in control of evidence which that party fails or refuses to tender or produce, the court is entitled to make adverse inference that if such evidence was produced, it would be adverse to such a party. In the case of Kimotho –vs- KCB (2003) 1 EA 108 the court held that adverse inference should be drawn upon a party who fails to call evidence in his possession.”
25. The failure to produce the bank statement, or any evidence for that matter by the bank to show that the appellant was indebted to it in any way to warrant it listing him with the CRB invites an adverse inference from this court that if produced it it would be in favour of the appellant.
26. The appellant produced a bank statement issued to him by the bank to show that on 29/3/2019 KShs 20,778.95 left his account. He denies that neither himself or his wife, the joint account holder withdrew that money. Only the bank, the custodian of that account would know how the money left the account and to whom or for what it was paid. That was information especially within the knowledge of the bank and therefore the burden to prove that it was not was upon it. By failing to tender any evidence to counter that offered by the appellant, I find that the appellant proved his assertion that the money was irregularly withdrawn from his account.
27. It is the appellant’s submission that the respondent breached the banker/customer contract by causing money to be withdrawn from his account without his consent and he ought to have been awarded general and that the respondent caused his name to be listed with the CRB without cause and for that reason he ought to be awarded punitive damages. In support thereof, the appellant relied on the case of, Equity Bank Limited & Another V Robert Chesang [2016] EKLR where court upheld Kenya Shillings 1 million general damages for libel and breach of contract and Kshs. 1.5 million aggravated punitive and exemplary damages for the banks failure to honor the plaintiffs payment vide ATM. In reaching that decision, is quoted Anson’s Law of Contract 28th Edition page 589 which states that:
“(1) Every breach of contract entitles the injured party to damages for the loss he or she suffered.” Damages for breach of contract are designed to compensate for damage loss or injury the claimant has suffered through that breach. A claimant who has not in fact suffered any loss by reason of the breach is nevertheless entitled to a verdict but damages recoverable will be purely nominal”
28. It is the respondents submission that the appellant failed to produce any evidence to prove that his name had been forwarded to the CRB by the respondent and also failed to exhaust the available dispute resolution mechanism. In affirming this position, the Respondent relied on the case of Jamlick Gichuhi Mwangi v. Kenya Commercial Bank Ltd and another [2016] eKLR where the case of Nairobi HCCC No. 551 of 2011 Daniel Gichanja Githaiga v. Credit Reference Bureau Africa Ltd and 2 others which states that:
“Finally, in my view , the application is premature as the procedure for collection and/or deletion of a customer’s information shared with the first defendant is clearly and intricately provided for under regulation 20 of the Banking (Credit Reference Bureau) Regulations 2008, which procedure inter alia requires a customer to notify the first defendant in writing that he disputes the reference, after which the 1st defendant carries out investigations and decides whether to delete or retain the reference. The plaintiff has not invoked and/or exhausted the aforesaid procedure, and therefore this application is premature.”
29. The respondent further relied on section 31 of the Banking Act which provides that:
“No duty to which an institution or its officers may be subject, shall be breached by reason of the disclosure, in good faith, of any information under subsection (2) to:
a) The Central Bank or to another institution: or
b) A credit reference Bureau established under subsection (4).
In the course of the performance of their duties and no action shall lie against the institution or any of its officers on account of such disclosure.
32. The issue of referring the case to alternative dispute resolution was made at a preliminary stage and the trial court made a decision on it. The respondent did not appeal that decisions and it is not part of this appeal and so this court cannot consider it.
33. That the nature of a bank/customer contractual relationship is fiduciary is explained in the case of Equity Bank Limited & Lucy Ndururi v Robert Chesang [2016] KEHC 2558 (KLR) cited by learned counsel for the appellant as follows:
“The bank/customer relationship is based on the utmost good faith. The bank is also under a contractual duty to diligently handle accounts of a customer, to ensure that funds-deposited on account are available when required by the customer. Any deviation from that understanding without justifiable reasons which should be communicated to the customer well in advance or immediately, the bank is in breach of a contract with the customer and is liable in damages.”
30. The money withdrawn from the appellant’s account without his knowledge was not explained by the bank at all. Consequently, I find that the bank was in breach of its fiduciary responsibility to the appellant to ensure that his money was kept in safe custody and available to him on demand. The bank breached its contractual obligation to the appellant.
31. With regard to whether any malice was demonstrated by the appellant by the action of the bank referring his name for listing with the CRB, the respondent relied on the case of Willliamson Diamonds Ltd and Another v. Brown [1970] EA 1 which imposes a burden on the appellant to prove malice.
32. The Respondent further submitted that the appellant did not present any proof before the court that the Respondent submitted their name to CRB.
33. It is true that appellant said in cross-examination that he had no evidence that he had been negatively listed by the CRB or that he had been denied loan facility. But, he did not have to be denied a loan facility to show that his creditworthiness had suffered. Once he received the letter from the bank informing him of the reference, why would he dare seek a credit facility knowing that it would be declined? The natural thing to do would be to seek to have the listing lifted first. That is what he did by filing the suit since the bank was unresponsive to his requests to do so.
34. The appellant provided to the bank all his pay slips evidencing the fact that he had fully repaid the loan as was demanded by the bank and upon the bank considering them it issued him with the letters acknowledging that the loan had been fully repaid. Consequently, there was no reason for the bank to refer his name to the CRB or to deduct any money from his account. He produced the acknowledgment letters in evidence and the same were not disputed by the bank as not being authentic.
35. The respondent did not contest the fact that it listed the appellant with the CRB. It expressly told him so in their letter to him. The learned magistrate was therefore in error to find that the appellant needed to do more. What he did was sufficient especially since the evidence was not contested. But, I do not think that in fact, the bank had any contrary evidence to counter the clear evidence by the appellant.
36. From the foregoing analysis of the evidence, it is apparent that the listing was wrong as the appellant had fully serviced his loan. I can only find that the acts by the bank were reckless as contended by the appellant.
37. Learned counsel for the respondent has cited the case of Bank of Baroda (Kenya) Limited v Timwood Products Ltd [2008] KECA 350 (KLR) where the Court of Appeal stated thus on the issue of aggravated and punitive damages:
“It is worth noting that the learned Judge did not specifically hold that in dishonouring the cheques, the Bank was malicious; all he said was that the Bank’s action “smacks of malice.” He refused to award aggravated damages. He could not have awarded punitive or exemplary damages because in Kenya such damages are awardable only under two circumstances, namely:-
i. “where there is oppressive, arbitrary or unconstitutional action by the servants of the government; and
ii. (where the defendant’s action was calculated to procure him some benefit, not necessarily financial, at the expense of the plaintiff – see OBONGO & ANOTHER V. MUNICIPAL COUNCIL OF KISUMU [1971] EA 91 which approved and applied the principles of the English case of ROOKES V. BANARD & OTHERS [1964] AC 1129”.
38. In spite of the bank writing to him a second time to confirming that he indeed had cleared his loan, there was no indication that it took the further step to have his name cleared from the CRB and to show that in fact, in the first place, it ought not to have referred his name there. The bank has not adduced any evidence that in referring the appellant to the CRB it did so in good faith.
39. I therefore find that he suffered damage for disrepute to credit and reputation. He is therefore entitled to general damages for disrepute to credit and reputation for which he is entitled to general damages. However, since he has said that no embarrassment was occasioned to him by way of seeking a loan and being denied on account of the wrongful listing, it means he mitigated the damage. All the same, the respondents action not being informed by any reason and especially after it had issued the appellant with a letter to show that he had repaid his loan in full and without any prior demand or notice to him, it had the effect of denying the appellant access to credit. It was calculated to cause him financial loss. The respondent would in turn benefit from the action by denying the appellant credit facilities. I find that the action was not only reckless but malicious too and for that the appellant is entailed to punitive damages.
40. I have considered the various decisions cited by learned counsel for the appellant and going by the case of Namalwa Christine Masinde v. National Bank of Kenya Ltd [2016] eKLR I assess general damages for the appellant at KShs 500,000/= and punitive damages at KShs 2,000,000/=.
41. Consequently, I find that the appeal has merit and I allow the same. The judgment of the learned trial magistrate is hereby set aside and substituted with entering judgment for the appellant against the respondent in terms that:
a. Special damages Kshs. 20,778.95 which is a refund of the money
b. A declaration that the respondent’s action of referring the appellant’s name to the Credit Reference Bureau (CRB) was reckless and unlawful and by further order it is directed that the respondent at its own cost to immediately withdraw the appellant’s name from the Credit Reference Bureau.
c. KShs 500,000/= general damages
d. KShs 2,000,000/= punitive damages.
e. Costs in the lower court and in this court and interest.
42. Orders accordingly.
Judgment delivered, dated and signed on the Virtual Platform, Teams this 19th day of December 2024
ANDAYI W. FRANCIS
JUDGE
In the presence of:
N/A for Appellant.
Gakungu for the Respondent.
Etropia Court Assistant.
Right of Appeal granted.
ANDAYI W. FRANCIS
JUDGE
Gakungu: We pray for 30 days stay of execution.
Court: Stay of execution 30 days granted.
ANDAYI W. FRANCIS
JUDGE