Anthony Kinyua Mwaniki & Miujiza Investments Limited v Kenya Commercial Bank Limited & Credit Reference Bureau Africa Ltd t/a Transunion [2017] KEHC 5413 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL CASE  NO. 361  OF 2013

ANTHONY KINYUA MWANIKI......................................1ST PLAINTIFF

MIUJIZA INVESTMENTS LIMITED..............................2ND PLAINTIFF

- V E R S U S –

KENYA COMMERCIAL BANK LIMITED...................1ST  DEFENDANT

CREDIT REFERENCE BUREAU

AFRICA LTD t/aTRANSUNION ................................2ND DEFENDANT

JUDGEMENT

1. Anthony Kinyua Mwaniki and Miujiza Investments Ltd, the 1st and 2nd plaintiffs herein filed an action vide the plaint dated 28th August 2013 against the Kenya Commercial Bank Ltd and Credit Reference Bureau Africa Ltd t/a Transunion, the 1st and 2nd defendants herein.  In the aforesaid plaint, the plaintiffs sought for general damages for defamation, punitive damages and general damages for negligence together with costs and interest.  The plaintiffs accused the defendants for publishing an inaccurate information in breach of statutory duties they owed to the 1st plaintiff which resulted in loss of business and anticipated profits.  The loss of business and anticipated profits is alleged to be as a result of the inaccurate and unlawful listing of the 1st plaintiff on the records of the 2nd defendant on the basis of information provided for by the 1st defendant.  The 1st defendant denied the plaintiffs’ claim and beseeched this court to have the suit dismissed with costs.  It denied ever forwarding any information concerning the 1st plaintiff’s listing by the 2nd defendant.  The 2nd defendant maintained that it was merely discharging its statutory duties as enshrined in the Banking Act (Credit Reference Bureau (CRB), 2008 in listing the 1st plaintiff’s credit information and as such it should not be held liable for the actions of the 1st defendant.

2. It is the plaintiff’s case that the 1st defendant negligently, maliciously and falsely reported to the Credit Reference Bureau (C.R.B), the 2nd defendant herein, that he was  a bad debtor in the month of September  2011 and without informing him of the listing as required by law.  The 1st plaintiff stated that he only came to know of the listing in the month of March 2013 while he was pursuing a loan facility from Cooperative Bank of Kenya Ltd.  The 1st plaintiff further stated that the 2nd defendant published in its data base and disseminated the listing which was inaccurate even after he informed it of the inaccuracy.  The 1st plaintiff further stated that the 2nd defendant never updated the information from the date of listing to the date when he learnt to the erroneous listing while he continued to faithfully repay his loan with the Kenya Commercial Bank Ltd.  The 1st plaintiff stated that the listing tarnished his name and diminished his creditworthiness as well as the credit worthiness of his associated business, the 2nd plaintiff to other financial institutions which use the information on listing to make prudent lending decisions.  The 2nd plaintiff stated that it approached Cooperative Bank of Kenya Ltd and Barclays Bank Ltd for financial accommodation to enable it expand its business but the 2nd plaintiff’s applications were denied for the reason of the 1st defendant’s inaccurate listing of the 1st plaintiff, who was one of the directors of the 2nd plaintiff/ company.  The 2nd  plaintiff also aver that it applied for agency banking with Family Bank (Ltd) but the same was declined on account of the 1st plaintiff’s inaccurate listing by the 2nd defendant.

3. It is also stated that the listing caused Cooperative Bank of Kenya Ltd and Barclays Bank Ltd to deny the 2nd plaintiff the loan facility which was already in progress for purposes of investing in the Simex Business and due to the listing the loan application by the 2nd plaintiff could not be approved.  The 2nd plaintiff further averred that the action by the 2nd defendant resulted in the loss of business and anticipated profits by it and a tarnished reputation and a diminished creditworthiness on the part of the 1st plaintiff.  In his evidence the 1st plaintiff (PW1) produced a bundle of documents as exhibits in evidence showing the estimated loss of the projected income from the Simex business had he been able to inject the funds from the loan facilities that were declined at ksh.4,766,389/60.

4. The 1st plaintiff testified on behalf of himself and the 2nd plaintiff.

The duo also summoned three independent witnesses to testify in support of their case.  Ruth Njeri Wairimu (PW2) and  Margaret Wangari Mbutu (PW3) told this court they had offered their title deeds to the 1st plaintiff  to use to pledge as securities to get loans from Cooperative Bank of Kenya Ltd but they had to withdraw their offer upon learning about the 1st plaintiff’s listing as a loan defaulter.  Dr. Patrick Ng’ang’a (PW4) a director with Malibu Pharmacy narrated that the 1st plaintiff’s former employer told this court that the pharmacy signed a check-off scheme with the 1st defendant  and the vents that followed the disbursement of the loan including the penalization of the employees for not remitting their monthly instalments during the grace period of three months.  PW4 also confirm that while many of his employees were affected by the accrued interest and penalties, none had been listed as defaulters by the 2nd defendant apart from the 1st plaintiff.

5. I have already stated that the defendants denied the plaintiffs claims.  Kenya Commercial Bank Ltd  the 1st defendant stated in its defence that although the 1st plaintiff was in arrears, it did not then or at any time thereafter submit his name to Credit Reference Bureau, the 2nd defendant for listing or at all even though it was entitled to do so.  The 1st defendant’s witness gave detailed evidence concerning the loans the 1st defendant advanced to the employees of Malibu Pharmacy.  It is said that in the year 2008, the 1st defendant through its K.I.C.C branch introduced an unsecured personal loan on check off system to the 1st plaintiff’s employer (Malibu Pharmacy) with the intention of benefitting its employees.  One of the issues raised by the 1st defendant’s staff who was invited to make a presentation was the grace period of the loan allowed before the payment of the first instalment which was communicated as being 3 months.  The 1st plaintiff took advantage of the offer and borrowed ks.550,000/= which amount was disbursed in July 2005.  The 1st plaintiff was to repay by monthly instalments of kshs.14,302/=.  The 1st plaintiff and his colleagues later learnt that they had been heavily penalised for non-payment over the grace period.  They consequently approached the bank and they eventually agreed with the bank to have the accrued interest and the resultant penalties capitalized thus raising the 1st plaintiff’s principal loan from ksh.550,000 to ksh.578,526/56 and the loan started to run afresh.  The 1st plaintiff settled the loan fully by July 2013.  The 1st defendants witness confirmed that the 1st defendant made arrangements with the 1st plaintiff  with his former colleagues to have the accrued interest and penalties capitalized.  The 1st defendant stated that owing to the aforesaid arrangements, it would have been expected to communicate with the 1st plaintiff to inform him that his employer had not remitted the instalments and seek to  have him do so.

6. On its part, the 2nd defendant claimed that it merely discharged its statutory duties under the Banking Act (Credit Reference Bureau) Regulations, 2008 in listing the 1st plaintiff’s credit information and as such should not be held liable for the actions of the 1st defendant.  The 2nd defendant further pleaded that it only published the information given to it for listing by various financial institutions, the 1st defendant included and therefore, there was no way it would have determined the accuracy or rectified the information without the 1st defendant forwarding the same to it.  The 2nd  defendant claimed it lawfully received the information from the 1st defendant and for this reason it filed a notice of indemnity against the 1st defendant.

7. At the close of evidence, this court invited learned counsels appearing in this matter to file and exchange written submissions.  I have considered the evidence and the submissions presented by both sides.  Parties to this dispute did not file the agreed issues, but they each chose to file their own individual issues.  I have critically examined all the issues listed by each party and I think the following issues commend themselves for determination:

i. Whether or not the 1st defendant listed the 1st plaintiff’s information with the 2nd defendant’s database?

ii. Whether there was default in the repayment of the loan borrowed from the 1st defendant by the 1st plaintiff?

iii. If the answer to (i) above is in the affirmative, whether the forwarding of the information was justifiable?

iv. Whether the publication was false and actuated by  malice.

v. Whether or not the defendants owed the plaintiffs any statutory duties.

vi. Whether or not the defendants if any, acted negligently in the performance of their statutory duties leading to the loss of business and anticipated profits.

vii. Whether the 2nd defendant is entitled to indemnity from the 1st defendant.

viii. Whether the plaintiffs are entitled to the remedies sought in the suit?

8. On the first issue as to whether or not the first defendant listed the 1st plaintiff’s information with  the 2nd defendant, the answer can easily be obtained by considering the evidence presented by the plaintiff’s witnesses and those of the 2nd defendant .  Though the 1st defendant denied forwarding the 1st plaintiff’s name for listing to the 2nd respondent, it is apparent from the correspondences contained in the 1st defendant’s bundle of documents via the email of 23rd  July 2013 from Obwaka Derrick Okumu, that the account was submitted by Kenya Commercial Bank Ltd sometimes either in August and September, 2011.  It is therefore clear that the 1st defendant did exactly what it has denied doing before this court.

9. On the second issue as to whether or not the 1st plaintiff was in default in the repayment of the 1st defendant’s debt, an allegation which led to the 1st plaintiff being listed, there is no dispute that the 1st plaintiff borrowed ksh.550,000/= from the 1st defendant on an agreed check-off system between the 1st plaintiff’s former employer, Malibu Pharmacy  and the 1st defendant.  There was a misunderstanding between the borrowers and the lender over the grace period before repayment.  The lender insisted it was a one month grace period while the borrowers claimed they were informed by the lender’s employee that the grace period was 3 months.  The parties extensively discussed the issue and eventually the 1st defendant agreed to capitalize the accrued interest and the penalties and thereafter waived the penalties. With respect, I agree with submissions of the 1st plaintiff that having capitalized the accrued interest and the penalties, the 1st defendant was estopped from taking any adverse decision against the 1st plaintiff.  There was therefore no plausible basis for listing the 1st plaintiff.  In fact, in its pleadings and evidence the 1st defendant stated that it never forwarded the 1st plaintiff’s name for listing because the parties had already made arrangements to settle the arrears.  The 1st defendant claimed that it merely submitted the 1st plaintiff’s information on 8th September as an update but its system interpreted it as a new listing and automatically created an account for it.  In sum, I am convinced that the 1st plaintiff did not default in repaying the debt due to the 1st defendant.  It is apparent that the monthly instalments were remitted timely hence there was no plausible reason to warrant the 1st plaintiff being listed as not credit worthy.  In answering the second issue, this court in essence equally answered the third issue.  In a nutshell, there was no iota of justification for the 1st defendant to cause the 1st plaintiff’s information to be listed in the negative sense by the 2nd defendant.

10. I have carefully considered issues (v) and (vi) and I think the two issues can be determined together.  Let me start with issue  (v) which is whether or not the 1st defendant owed the 1st plaintiff a statutory duty in the manner it handled the 1st plaintiff’s information.  Under Regulation 20(1) of the Banking (Credit Referencing Bureau) Regulations, 2008, a customer has a right to know what information an institution submitted to the Bureau regarding that customer.  In fact Regulation 28(1)(a) is expressed in mandatory terms, that institutions shall be required to notify the customer of the name and address of the Bureaus to which the customer’s information has been forwarded to within 30 days of the first listing of the customer’s information with the bureaus.  In this case, the 1st plaintiff was listed on 8th September 2011 and the 1st plaintiff came to know for the first time of his listing in the year 2013 from the Family Bank Ltd and the Cooperative Bank of Kenya Ltd while those banks were considering the 1st plaintiff’s loan applications and agency banking application on behalf of the 2nd plaintiff.  The effect of the 1st defendant’s conduct is that the 1st plaintiff was denied the right and opportunity to have the information rectified in good time.  There is no doubt that the 1st defendant breached the statutory duty owed to the 1st plaintiff thus making him lose his creditworthiness.

11. The other issue which needs to be determined is whether or not the publication was false and actuated by malice.  There is ample evidence from the plaintiff and the 1st defendant that the information published by the 2nd defendant depicting the 1st plaintiff as a loan defaulter was false since the 1st plaintiff made his repayments regularly until the debt was settled in full.  By its letter dated 8th September 2011 addressed the 2nd defendant made a request to the 2nd defendant to update the information listed about the 1st plaintiff to reflect “performing” instead of “non-performing”.  Basically the 1st defendant admitted making a mistake.  It is on record that the 1st defendant denied knowledge of the 1st plaintiff’s listing as a loan defaulter.  The denial was later on proved otherwise. When the 1st defendant was made aware of the inaccurate information, it took no serious effort to have the 1st plaintiff’s name deleted from the database and or report to the 2nd defendant. The 1st defendant merely wrote to the 2nd defendant requesting it to change the information from stating as “non-performing” to “performing”.

12. There was no serious follow up by the 1st defendant to ensure that its request was immediately acted upon in view of  the fact that it had knowledge that the information was accessible by other financial institutions. This is exactly what happened to the 1st plaintiff.  I am convinced that in the circumstances of this case, malice can be inferred by this court on the part of the 1st defendant for two reasons.  First, the 1st defendant failed to notify the 1st plaintiff that it had caused his information to be listed and published by the 2nd defendant.  That conduct was in breach of Regulation 28(1) (a) of the Banking (Credit Referencing Bureau) Regulations, 2008.  Secondly, the 1st defendant failed to take urgent steps to have the 1st plaintiff’s name deleted from the list of those customers with non performing loans despite having knowledge that the information listed and published was inaccurate.  Though the element of malice can be inferred by this court, I am unable to hold that the plaintiffs were defamed in any way.  What is clear in my mind is that the 1st defendant had no intention to defame.  But the truth of the matter is that the 1st defendant acted in a reckless and negligent manner in the performance of its statutory duty thus making the 1st plaintiff lose his rating as a credit worthy person.  He and the company associated with him missed out on financial accommodation.  His company, the 2nd plaintiff failed also to clinch an appointment as a banking agent for Family Bank Ltd.

13. The other issue which was left to this court to determine is the liability of the 2nd  defendant .  The 2nd defendant’s defence is that it simply performed its statutory duty to publish the information forwarded to it by the 1st defendant.  The 2nd defendant went ahead to issue a notice of claim as against the 1st defendant for indemnity.  The 1st defendant did not resist this claim and rightly so because the inaccurate information the 1st defendant provided is the reason which this suit was filed.  I agree with the submission of the 2nd defendant that it merely  performed its statutory duty.  The duty to ascertain the accuracy of the information lay with the 1st defendant.

14. The final issue is whether or not the  plaintiffs are entitled to the reliefs sought.  In order to appreciate the plaintiffs’ claims it is important to state the prayers stated in the plaint as follows:

a.Loss of anticipated profits from the Simex and agency businesses as will be quantified  at the hearing of this suit.

b. General damages for the publication of inaccurate and legally unjustified adverse information;

c.General damages for defamation leading to loss of business and individual reputation.

d.Punitive damages for breach of statutory duties owed to the plaintiffs’ by the defendants;

e.Punitive damages for negligence leading to loss of business.

f.Costs of and incidental to this suit, and

g.Any other or further relief as this honourable court may deem fit and just to grant.

15. The plaintiffs have asked to be paid the loss of anticipated profits of kshs.4,766,389/60.  It is said that is the amount expected to be gained from Simex and agency businesses.  This is profit attached to the 2nd defendant, which is a limited liability company which had no bank-customer relationship with the 1st  defendant.  The 1st plaintiff and 2nd plaintiff are distinct entities.  For this reason I decline to make an award on prayer (a) of the plaint.

16. On prayer (b), I am satisfied that the 1st plaintiff is entitled to damages for the publication of the inaccurate information.  The plaintiffs did not suggest any figure.  I grant the 1st plaintiff a global award of ksh.200,000/=.

17. In prayer (c) the plaintiffs have asked to be given damages  for defamation.  In the body of the judgment, I stated that there was no proof of defamation.  I therefore decline to grant any.

18. In paragraph (d), the plaintiffs sought for punitive damages for breach of statutory duties owed to them. I find this prayer as properly established.  None of the parties suggested a figure.  I grant ksh.100,000/= on this head to the 1st plaintiff.

19. In prayer (e) the plaintiffs have asked to be paid punitive damages for negligence leading to loss of business.  Again on this head, there was no cogent evidence showing the actual anticipated loss.  I grant on this prayer a sum of kshs.100,000/=.

20. The 2nd defendant has beseeched this court to make an order directing the 1st defendant to indemnify it.  I have made no adverse orders against the 2nd defendant save that it may be required to settle costs of its advocates.  I think that is an expense the 1st defendant should meet.

21. In the end, I enter judgment in favour of the 1st plaintiff and against the 1st defendant in the following terms:

i. Damages for publication ofinaccurate information          ksh.200,000/=

ii. Damages for breach of statutory duties       ksh.100,000/=

iii. Damages for negligence                           ksh.100,000/=

Total

iv. The 1st defendant to pay costs of the suit to the 1st plaintiff.

22. The suit by the 2nd plaintiff is dismissed with no order as to costs.

23. The suit as against the 2nd defendant is dismissed with costs being met by the 1st defendant in form of indemnity.

Dated, Signed and Delivered in open court this 25th day of May, 2017.

J. K. SERGON

JUDGE

In the presence of:

....................................................  for the Plaintiff

..................................................... for the Defendant