Steve Nzivo Kilonzo VS KCB

(Being an Appeal from the Ruling of Hon. J.O Magori (SPM) in the Senior Principal Magistrate’s Court at Makindu, Civil Case No. E019 of 2021, delivered on 8th June 2021)

JUDGMENT

STEVE NZIVO KILONZO the plaintiff/appellant filed Makindu, Civil Case No. E019 of 2021 vide plaint amended on 21st June 2021seeking various orders including a declaration that the defendant had failed to act diligently as concerned repair of m/v registration no KCJ 214A following the road traffic accident of 20/7/2018, a declaration that the plaintiff should not be held liable  for the failure  to honor loan repayment from 20/7/2018 until the date of confirmation of the full repair of the m/v registration no KCJ 214A., an order vacating any interest  or penalties loaded on the said loan above with the defendant for the period from 20/7/2018 to a date of confirmation of the full repair of the m/v registration no KCJ 214A, a permanent injunction to restrain the Respondent, its servants, agents and or employees from auctioning, disposing off and or interfering with his motor vehicle registration No. KCJ 214A Lorry/truck, an order that the said m/v be returned to him and costs and interest of the suit .

2. His case was that, through a loan agreement between him and the KENYA COMMERCIAL BANK the defendant/ Respondent, he obtained a loan facility whereby the Respondent financed him to acquire M/v reg no KCJ 214A, the lorry. The facility was to the tune of Kshs 6,543,030/= repayable in monthly installments of Kshs 161,751/=.  He averred that on or about 20/07/2018, the lorry was involved in an accident and it was the Respondent’s mandate to engage the services of a reliable insurer to protect the interests of the parties. That the Respondent neglected its mandate of ensuring that the lorry was repaired timeously and the consequence was that his transport business came to a grinding halt and he was unable to service the loan. That subsequently the Respondent instructed its auctioneers to repossess the lorry and has been intent on selling it to recover the arrears prompting this suit

3. Together with the plaint, the Appellant filed an application under certificate of urgency seeking inter alia a temporary injunction to stop the auction. The trial magistrate heard the parties and came to the finding that the requirements for granting a temporary injunction had not been met and dismissed the application with costs.

The Appeal

4. Aggrieved by that ruling, the Appellant filed this appeal on the following grounds;

a) That the learned magistrate misapprehended the law on what amounts to a prima facie case as applies to determination of application for interlocutory injunctions.

b) That the learned magistrate misdirected himself on the law on grant of interlocutory injunctions.

c) That the learned magistrate’s refusal to grant an interlocutory injunction amounted to wrongful exercise of discretion.

d) That the learned magistrate erred in law and fact in determining at the interlocutory stage, the Appellant’s notice of motion in a manner that determined the dispute between the parties as should have been determined only in the main suit.

e) That the learned magistrate erred in law and fact in finding that the Appellant had defaulted in repaying the loan prior to accident when the evidence tabled before the court showed otherwise.

f) That the learned magistrate erred in law and fact in finding that the Appellant failed to take collection of the motor vehicle from the garage contrary to the evidence tabled by the parties.

g) That the learned magistrate erred in findings of fact.

h) That the learned magistrate erred in law and fact in going outside the evidence tendered by the parties.

i) That the learned magistrate’s exercise of discretion was plainly wrong in the circumstances of the case.

5. Directions were given that the appeal be canvassed through written submissions. Accordingly, the parties complied and filed their respective submissions.

The Appellant’s Submissions

1. To remind the court of its duty as a first appellate court is to reconsider, re-evaluate and re-assess all the evidence tendered before the lower court and draw its own independent conclusions the Appellant relied on the oft cited Selle & Another -vs- Associated Motor Boat Co. Ltd & Others [1968] EA 123

2. The and reminded this court that

3. The Appellant submitted that the central issue arising for determination is whether the learned magistrate’s refusal to grant interlocutory injunction amounted to wrongful exercise of discretion.

The Appellant submitted that the trial magistrate misapprehended the law on what amounts to a prima facie in relation to interlocutory injunctions because he obviously took into consideration facts / issues that ought only to be determined at the hearing of the main suit instead of the principles for grant of interlocutory injunction as set out in case of Giella -vs- Cassman Brown (1973) EA 358 thus;

“The conditions for the grant of an interlocutory injunction are now I think well settled in East Africa. First an applicant must show a prima facie case with probability of success. Secondly an interlocutory injunction will not be normally granted unless the applicant might otherwise suffer irreparable injury which would not adequately be compensated by an award of damages.

Thirdly, if the court is in doubt, it will decide an application on the balance of convenience.”

4. He submitted that what amounts to a prima facie case was explained in Mrao Ltd -vs- First American Bank of Kenya Ltd & 2 Others [2003] eKLR as follows:

“A prima facie case is more than an arguable case. It is not sufficient to raise issues. The evidence must show an infringement of a right, and the probability of success of the applicant’s case upon trial. That is clearly a standard which is higher than an arguable case.”

5. Further, he submitted that in Habib Bank Ag Zurich -vs- Eugene Marion Yakub, C. A. No. 43 of 1982 (unreported), 'probability of success' was taken to mean that 'the Court is only to gauge the strength of the Plaintiff's case and not to adjudge the main suit at the stage since proof is only required at the hearing stage'.

6. The Appellant also relied on American Cyanamid Co (No 1) -vs- Ethicon Ltd [1975] UKHL 1 where it was held that:

“It is not part of the Court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial.”

7. He submitted that a similar view was expressed by the Court of Appeal in Mbuthia -vs- Jimba Credit Finance Corporation & Another [1988] KLR 1 where it held that:

“The correct approach in dealing with an application for an interlocutory injunction is not to decide the issues of fact, but rather to weigh up the relevant strength of each side’s propositions.”

8. The Appellant also relied on Charter House Investments Ltd -vs- Simon K. Sang and others, Civil Appeal No. 315 of 2004 where the Court of Appeal held that:

“Injunction is an equitable and discretionary remedy, given when the subject matter of the case before the Court requires protection and maintenance of the status quo. The award of a temporary injunction by Courts of equity has never been regarded as a matter right, even where irreparable injury is likely to result to the applicant. It is a matter of sound judicial discretion, in the exercise of which the Court balances the conveniences of the parties and possible injuries to them and to third parties. In the Giella case (supra) the predecessor of this Court laid down the principle that for one to succeed in such an application, one must demonstrate a prima facie case with reasonable prospect of success; that he stands to suffer irreparable damage which cannot be compensated for by an award of damages; and that the balance of convenience tilts in his favor.”

9. The Appellant submitted that, naturally and as an implied term, the Respondent having arranged for insurance of the motor vehicle, it was its responsibility to take up the issue of repairs through its insurance agency, KCB insurance agency. That the trial magistrate failed to take note of the fact that the Respondent took over a staggering two years to have the lorry repaired and that he was completely driven out of business during that period.

10. He submitted that the court disregarded concerns which he raised to the Respondent and which fell squarely on the bank despite the evidence which he tabled to the effect.

11. He submitted that it was obviously wrong for the trial magistrate to disregard his evidence while at the same time considered averments by the Respondent that he (Appellant) had previously defaulted in servicing the loan, an issue which ought not to be considered at an interlocutory stage but in the main suit. That it was also wrong for the court to do so yet the failure to service the loan was solely attributable to the said accident and delays in the repair. He contended that in the circumstances, the court made a flawed determination for making a final determination of the dispute contrary to the legal principles that a court determining an interlocutory injunction should be careful not to venture into determination of the main suit. Further, he contended that, it was plainly wrong for the court to hold that he had unjustifiably defaulted in repaying the loan which entitled the Respondent to repossess the motor vehicle as it did.

12. The Appellant submitted that the court misapprehended the meaning of prima facie case as applied to applications for interlocutory injunctions to arrive at the erroneous conclusion that he had failed to establish a prima facie case despite the myriad serious weighty issues raised against the Respondent and which called for the inevitable preservation of the motor vehicle to await their determination of the main suit.

13. He submitted that the bone of contention arose due to Respondent’s failure to have the lorry repaired in time which in turn put him out of business making it impossible for him to service the loan. That he demonstrated through documents attached to his supporting and supplementary affidavits, dated 05/02/2021 and 19/04/2021, that the Respondent failed in its duty to ensure the motor vehicle was repaired and released timeously. That he demonstrated that he had the right to have the lorry repaired and released without delay but there had been a delay for a period of over two (2) years and these rights were contravened by the Respondent.

14. He submitted that while it is true that the Respondent has a right to realize repayment of its loan through liquidating the suit motor vehicle which was used to secure repayment of the loan, the vehement assertions that the Respondent deliberately acted negligently and exposed him to a default ought not to be ignored. That, doing so would be to elevate the Respondent to a place of beyond question whenever it acted in contravention of its obligations as a lender. That the Respondent should not be allowed to propagate a default by its own acts/omissions only to rush and purport to realize security without being questioned. That, doing so would be to make a mockery of the rights of people like him, who expect the Respondent to act diligently in handling affairs affecting its borrowers.

15. As to whether he would suffer irreparable injury, the Appellant submitted that he clearly demonstrated that the lorry was not only his life investment but also one that he had used to fend for his family and himself. That this fact had not been denied by the Respondent and had been given credence by the way his ability to repay the loan was impaired after the lorry was involved in a road traffic accident.

16. He submitted that the peculiar circumstances of this case tilts in favor of granting the orders. That the Respondent had not demonstrated the prejudice or inconvenience it would suffer if not granted the orders sought and if his claim against the Respondent failed, the Respondent could still go ahead and sell the lorry, which is in any event was in its possession. That on the other hand, his success in the case would amount to nothing if the lorry was sold.

Respondent’s Submissions

17. On its part the Respondent relied on section 78 of the Civil Procedure Act and Peter M. Kariuki -vs- Attorney General [2014] eKLR, to remind the court of its duty to ‘…… re-evaluate, reassess and reanalyze the extracts of the record and draw its own conclusions.’

18. The respondent also relied on Giella -vs- Cassman Brown (supra) and Nguruman Limited -vs- Jan Bonde Nielsen & 2 others CA No.77 of 2012 (2014) eKLR, and submitted that for the Appellant to benefit from the order of injunction, he was required to prove that he had a prima facie case with a probability of success. That, he had to prove that failure by the court to issue orders sought would result in him suffering irreparable loss which could not be compensated by damages and that if the court was in doubt, it would determine the issue on a balance of convenience.

19. The Respondent relying on Mrao Ltd (supra)submitted that the Appellant did not have a prima facie case. The Court of Appeal therein stated;

“... in civil cases, it is a case in which, on the material presented to the court a tribunal properly directing itself will conclude that there exists a legal right which has apparently been infringed by the opposite party as to call for an explanation or rebuttal from the latter.”

20. The Respondent submitted that the letter of offer dated 6/8/2016 and dully executed by the parties herein was a contract between the parties and there was evidence that the Appellant has materially failed, refused and/or ignored his contractual obligations as provided in the letter of offer. That it was the duty of the court to interpret and enforce contracts as executed by the parties indicating their willingness to be bound by the terms thereof. The Respondent quoted clause 11.1 of the letter of offer verbatim as follows: -

“In the event of failure by the borrower to make any repayment of principal or payment of interest or other moneys in respect of the facility on its due date then the bank’s commitment to advance the facility or any balance thereof shall cease and the whole amount of the outstanding facility and all accrued interest or other amounts owing hereunder will become repayable forthwith on demand in writing made by the bank at any time. In addition, the security held by the bank in respect of the facility shall become immediately enforceable.”

21. The Respondent submitted that the dispute arose from accounts and as such, injunction orders cannot issue and the appeal must fail. The Respondent placed reliance on Feba Radio (Kenya) Limited T/A Feba Radio -vs- Ikiyu Enterprises Limited (2017) eKLR where the court held: -

“Where it was held that a court of law cannot purport to rewrite a contract between the parties, the parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded”

22. On the question of irreparable loss, the Respondent relied on Nguruman Limited (supra) where the Court of Appeal held that;

“On the second factor, the Applicant must establish that he might otherwise suffer irreparable injury which cannot be adequately remedied by damages in the absence of an injunction, is a threshold requirement and the burden is on the Applicant to demonstrate prima facie, the nature and extent of the injury. Speculative injury will not do; there must be more than an unfounded fear or apprehension on the part of the Applicant. The equitable remedy of temporary injunction is issued solely to prevent grave and irreparable injury; that is injury that is actual, substantial and demonstrable; injury that cannot adequately be compensated by an award of damages. An injury is irreparable where there is no stand by which their amount can be measured with reasonable accuracy or the injury or harm is such a nature that monetary compensation of whatever amount, will never be adequate remedy.”

23. The Respondent submitted that the subject matter in this case is the lorry which was purchased through a loan facility. That, it has been demonstrated through the loan account statement and the correspondences between the parties that the loan arrears as at 24/6/2019 had accrued to a total sum of Kshs. 6,136,118.75/=. The Respondent placed reliance on Giro Commercial Bank Limited -vs- Halid Hamad Mutesi (2002) eLKR as considered by the Court of Appeal in Stek Cosmetics Limited -vs- Family Bank Limited & Anor (2020) eKLR where the court stated:

“it has been held time and time again that a mortgagee cannot be restrained from exercising his power of sale because the amount due is in dispute or that the mortgage has commenced a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. In that case, where the debt is admitted as due and the loan is not being serviced, the court should not grant an injunction”

24. On the question of balance of convenience, the Respondent cited Pius Kipchirchir Kogo -vs- Frank Kimeli Tenai (2018) eKLR where the court stated that;

“The meaning of balance of convenience will favor the plaintiff' is that if an injunction is not granted and the Suit is ultimately decided in favor of the plaintiffs, the inconvenience caused to the plaintiff would be greater than that which would be caused to the defendants if an injunction is granted but the suit is ultimately dismissed. Although it is called balance of convenience it is really the balance of inconvenience and it is for the plaintiff’s' to show that the inconvenience caused to them be greater than that which may be caused to the defendant’s inconvenience be equal, it is the plaintiff who suffer. In other words, the plaintiff has to show that the comparative mischief from the inconvenience which is likely to arise from withholding the injunction will be greater than which is likely to arise from granting”

25. The Respondent submitted that the Appellant had defaulted in repaying the loan arrears and the bank stood to be inconvenienced greatly as compared to the Appellant. That the Appellant could not default on the loan and still be in possession of the security to the loan.

Analysis and Determination

26. AS a first appellate Court my duty is to analyze and re-evaluate the evidence on record and to draw my own conclusions bearing in mind that I did not have the benefit of seeing or hearing the witnesses testify. There having been no witnesses in this matter the duty is to read the record and review it accordingly.

I have carefully considered the grounds of appeal, the rival submissions and entire record, it is my considered view that the only issue for determination is whether the prayer for temporary injunction as sought by the appellant, was tenable.

27. It is common ground that the factors to consider in determining an application for interlocutory injunction are as enunciated in the locus classicus Giella -vs- Cassman Brown (supra) as; prima facie case with probability of success, irreparable injury that cannot be compensated by an award of damages and balance of convenience where the court is in doubt.

28. The Appellant’s position was that the Respondent (the Bank) having arranged for the insurance of the lorry had the mandate of taking up its repairs and ensuring that they were carried out without inordinate delay as that was the source of the income towards the payment of the loan. That the Bank took over a staggering two years to have the lorry repaired and he was driven out of business during that period.

29. The Banking facility dated 05/08/2016 was executed by both parties and is therefore the reference document with regard to terms and conditions. The Bank urged this court to be guided by clause 11 of the document which provides that the security becomes enforceable immediately upon default by the borrower in payment of the principal or interest or other moneys in respect of the facility. By his own admission, the Appellant defaulted in his monthly installments after the lorry was involved in an accident and he attributed the default to being out of business because the Bank took long to have the lorry repaired.

30. One of the conditions precedent under clause 7.14 was; ‘The Borrower to obtain a comprehensive insurance cover with an insurance company in the Banks panel arranged by KCB Insurance Agency or Borrower’s choice with the interest of the Bank being duly noted on the policy documents.’

31. Clause 18 of the document provides as follows;

18.1 All insurable assets forming part of the Bank’s security shall be comprehensively insured against theft/damage/fire for the full value thereof during the tenure of the facilities with an insurance company in the Bank’s panel arranged by KCB Insurance Agency or borrower’s choice with the interest of the Bank being duly noted on the policy document.

18.2 Upon the expiry of any insurance cover, the borrower shall within 7 days of such expiry deliver to the Bank the relevant renewal advice failing which the bank shall be at liberty to effect such insurance at the borrower’s cost without further reference to the borrower and debit the Borrower’s account with any amount paid by the Bank.

32.  According to the banking facility document therefore, the Insurance cover would be provided by an insurance company in the Bank’s panel or by an insurance company chosen by the borrower and if chosen by the latter, the Bank’s interest had to be duly noted in the policy documents. In order to know which route was taken in this case, I have keenly looked at all the correspondence between the parties and the indication is that the Bank gave instructions on where the lorry would be taken after the accident and was actively involved in all the processes thereafter.

33. The Bank deposed that the lorry was repaired and ready for collection on 05/06/2018 but the Appellant complained about the quality of repairs. An email from the Senior Supervisor-Claims at Madison Insurance Ltd alluded to a meeting held on 05/07/2019 where the action points agreed upon were;

‘Insured shall source out the services of professional (minimum, diploma in automotive engineering to assess and give an independent report on the chassis of the truck. The report to be ready.

The workshop shall source for a good cabin for FSR model and contact the insured to have thereafter sign a document. Garage will communicate on the TAT.

The exhaust shall also be repaired.’

34. The Bank also deposed that the corrections were completed in the month of August 2019 but the Appellant delayed in going to the garage to confirm the status of repairs. That, in the month of September 2019, all the parties held a meeting at the garage and confirmed that all the repairs had been done satisfactorily.

35. From all the materials placed before court, the indication is that the insurance company was chosen by the Bank and that the Bank maintained a high level of control in how the insurance company dealt with the lorry. The Appellant has exhibited several letters of complaints addressed to the Bank where he was complaining about the length of time it was taking to repair the lorry and the state of repairs. Further, the email which I have quoted above shows that the lorry was still unroadworthy one year after the accident and that means that the Appellant’s complaint, that the Bank took an unreasonably long period to have the lorry repaired, should be ventilated in a full trial. In my view, the Appellant established a prima facie case with probability of success.

36. As to whether the Appellant would suffer irreparable injury which cannot be compensated by award of damages, the Appellant deposed that the lorry was his source of livelihood.

37. According to the Respondent’s Replying Affidavit filed in the trial court, it was deposed, at paragraph 27, that the total accrued overdue as at 24/06/2019 was Kshs 6,136,118.75 comprising of; Principal sum; 3,810,912.40, Interest: 1,041,617.60 and Penalty Interest: 1,283,588.75.

38. The total loan advanced to the Appellant was Kshs 6,543,030/= and was to be repaid within 5 years with effect from 30/08/2016. My deduction from these figures is that the Appellant was doing fairly well in the loan repayment for a period of about two years prior to the accident and the trend appeared to diminish after the accident hence lending credence to his deposition that the lorry was his source of livelihood and that his ability to repay the loan was dependent on the lorry being in business. In my view, the Appellant managed to demonstrate that a disruption of livelihood was not something that could be compensated by an award of damages.

39. A lot of time had passed since the accident and the lorry was out of business. While the Appellant may have resorted to other means to sustain his livelihood, a hardship in the transition process cannot be ruled out. In the circumstances, the balance of convenience would have tilted in favor of preserving the lorry until the case was heard and determined.

40. From the materials placed before me, I am of the view that the  trial magistrate erred by refusing to grant the injunction.

41. In the circumstances they appeal hearing is allowed in the following terms:

i. The interim order of injunction issued on 21/6/2021 be and is hereby confirmed  restraining the respondent by themselves their officers, employees, agents, servants or any other person whomsoever, from in any way disposing off, auctioning, selling, or in any other way interfering with the applicant’s ownership of motor vehicle Reg no KCJ 214A Isuzu FSR truck pending the hearing and determination of Makindu MCCC number E019 of 2021 Steve Nzivo Kilonzo Versus Kenya Commercial Bank Limited.

CA Nelima

Appellant’s Advocates

Muumbi & Co. Advocates

info@muumbilaw.com

Respondents’ Advocates

B.M Mung’ata & Co. Advocates

bmmungata@yahoo.com