BOMAS MOTOR MART LTD v FAMILY BANK LIMITED [2009] KEHC 3190 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI (MILIMANI COMMERCIAL COURTS)

CIVIL CASE 668 OF 2008

BOMAS  MOTOR MART LTD…………………..……PLAINTIFF

VERSUS

FAMILY BANK LIMITED…………....……………...DEFENDANT

RULING

The plaintiff filed an application pursuant to provisions of Section 3Aand63 (c) & (e)of theCivil Procedure ActandOrder XXXIX Rule 1 (a) & (b), 2, 3 (1)and9of theCivil Procedure Rules seeking orders of injunction to restrain the defendant, whether by itself or through its agents from repossessing or interfering with the plaintiff’s custody, control and possession of motors vehicle Reg. No. KAY 589R and KAY 761B pending the hearing and determination of the suit.  The plaintiff further prayed for an order of the court to compel the defendant and/or its agents to forthwith release motor vehicle Reg. No. KAY 589R into the possession and custody of the plaintiff pending the hearing and determination of the main suit.  The application is supported by the annexed affidavit of Komu Gitau, the managing director of the plaintiff and is based on the grounds on the face of the application.  He swore a supplementary affidavit in further support of the application.  The application is opposed.  Harun Njuguna, the manager debt recovery unit of the defendant swore a replying affidavit in opposition to the application.

At the hearing of the application, I heard submissions made by Mr. Gachomo on behalf of the plaintiff and by a Mr. Maluki on behalf of the defendant.  Mr. Gachomo submitted the plaintiff borrowed a sum of Kshs.4. 2 million from the defendant to enable it purchase two motor vehicles.  The plaintiff fell in arrears in repaying the monthly installments due.  He submitted that on 16th October 2008, there was an agreement between the plaintiff and the defendant in regard to the arrears.  According to the plaintiff, the defendant agreed that if arrears were paid, motor vehicle Reg. No. KAY 589R which had been repossessed by the auctioneers would be released.  The plaintiff paid the amount that was demanded and which at the time was in arrears.  He submitted that despite making payment of the arrears, the defendant reneged on its promise to release the motor vehicles.  He maintained that the plaintiff has suffered loss by the defendant’s refusal to release the said motor vehicles since the motor vehicle were contracted to DHL.  He reiterated that the defendant was bound to honour its promise to the plaintiff to release the motor vehicles upon the payment of the then outstanding arrears.  He urged the court to evaluate the correspondence exchanged between the plaintiff and the defendant.  He maintained that the defendant had not disputed the averments made by the plaintiff.  He submitted that there was no ground upon which the defendant could escape liability to be held accountable in regard to the promise that it had made to release the motor vehicle to the plaintiff upon payment of the then outstanding arrears.  He maintained that the plaintiff had established a prima facie case to entitle this court grant it the orders sought in the application.  He urged the court to exercise its discretion in favour of the plaintiff and allow the application.

Mr. Maluki for the defendant opposed the application.  He explained that the letter which the plaintiff sought to rely on in support of its application for the release of the motor vehicle required that the then outstanding arrears of Kshs.526,000 /= be paid by 17th October 2008.  He submitted that the said amount was not paid within the specified period but rather on 23rd October 2008, when the plaintiff paid an amount leaving an outstanding balance of Kshs.175,973. 80.  He maintained that the plaintiff had fallen in persistent arrears and in the circumstances the defendant was entitled to repossess the said motor vehicles.  He urged the court to peruse the annexed letter of offer which was executed by the plaintiff and which provided that in the event that the plaintiff fell in arrears in the repayment of the amount owed, the whole amount would become due and repayable immediately.  He submitted that the outstanding amount owed by the plaintiff as at 3rd December 2008, was Kshs.3,294,374. 80.  He reiterated that this was the amount that was due and payable by the plaintiff.  He maintained that the plaintiff had not established a case to entitle this court grant the orders sought in the application.  He submitted that the plaintiff was not deserving of the exercise of discretion by the court in view of the fact that the plaintiff had defrauded the defendant in relation to motor vehicle Registration No.KAY 761B which the plaintiff had pledged to CFC bank when the same was still pledged as security to the defendant.  The defendant was of the view that the plaintiff had not come to court with clean hands and therefore was not entitled to the orders sought.  He urged the court to dismiss the plaintiff’s application with costs.

I have carefully considered the rival arguments made by counsel for the plaintiff and counsel for the defendant.  I have also read the pleadings filed by the parties in support of their respective opposing positions.  The issue for determination by this court is whether the plaintiff established a case to enable this court grant it the interlocutory injunction sought. The principles to be considered by this court in determining whether or not to grant the interlocutory injunction sought are well settled.  In Giella vs Cassman Brown [1973] EA 358 at page 360 Spry VP held that:

“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 a probability of success.  Secondly, an interlocutory injunction will not normally be 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.  (E.A. Industries v. Trufoods, [1972] E.A. 420).”

In the present application, certain facts are not in dispute.  It is not disputed that the plaintiff was advanced two loan facilities of the sum of Kshs.2. 1 million and 2. 31 million respectively.  The two loan facilities were for the purpose of enabling the plaintiff purchase two motor vehicles.  The two motor vehicles were Mitsubishi Fuso Reg. No.KAY 589R and KAY 761B.

According to the letters of offer which were executed by the plaintiff dated 23rd July, 2007 and 20th July 2007 respectively, it was a condition of the loan agreement that in the event that the plaintiff shall fail to pay the agreed monthly installments, the defendant would be entitled to terminate the entire loan facility and demand full  repayment of the loan that shall then be outstanding.  The securities for the two loans were the two motor vehicles.  According to clause 10 of the letter of offer, the logbooks of the two motor vehicles would be registered jointly in the names of the plaintiff and the defendant.  The said log books would be kept in the custody of the defendant until payment in full of the loan together with the accrued interest.

There is no dispute that the plaintiff fell in arrears.  The defendant repossessed one of the motor vehicles, being motor vehicle Reg. No. KAY 589R.  It appears that the repossession of the said motor vehicle was also triggered by discovery by the defendant that the plaintiff, contrary to the loan agreement, had pledged motor vehicle Reg. No.KAY 761B to CFC bank.  The plaintiff admitted pledging the logbook of the said motor vehicle to CFC bank.  However, it gave an explanation that an official of the defendant, a Mr. R. K. Maungu had verbally assured it that the defendant did not have objection to the logbook of the said motor vehicle being pledged to CFC bank. It was apparent that although the loan agreement provided that the two motor vehicles would be jointly registered in the names of the plaintiff and the defendant, somehow, the plaintiff still retained the logbook of motor vehicle Reg. No. KAY 761B which enable it to pledge the same to CFC bank.

What is further not in dispute is that following the repossession of motor vehicle Reg. No. KAY 589R, the plaintiff and the defendant entered into negotiations with a view to amicably resolving the matter.  On 16th October 2008, the defendant wrote to the plaintiff informing it to pay the then outstanding arrears of Kshs.526,000 /= together with a further sum of Kshs.47,000 /= being auctioneer’s charges to secure the release of the repossessed motor vehicle.  The plaintiff was required to pay the amount within a day i.e. by 17th October 2008.  The plaintiff paid the sum of Kshs.580,000 /= on 23rd October 2008.  The plaintiff was notified to pay a further sum of Kshs.5,000 /= being the accrued auctioneer’s charges.  The plaintiff paid the amount on 24th October 2008.  According to the plaintiff, after paying the agreed amount, the defendant reneged on its undertaking to release the said motor vehicle.  It was on that basis that the plaintiff was seeking orders of the court to compel the plaintiff to abide by its undertaking to release the said repossessed motor vehicle.  The defendant insisted that the plaintiff had failed to abide by the agreement which required it to repay the entire outstanding arrears before the motor vehicle could be released.  The defendant reiterated that the plaintiff failed to pay the entire outstanding arrears by leaving a balance of Kshs.175,973. 80.

Having evaluated the facts of this case, it was evident that the plaintiff breached the terms of the loan agreement by pledging motor vehicle Reg. No.KAY 589R to CFC bank while there was still a substantial outstanding amount owed to the defendant.  The loan agreement did not contain a clause in it that would have enabled the plaintiff to pledge the same motor vehicle to another financial institution while the plaintiff still owed the defendant.  This court was not persuaded by the explanation offered by the plaintiff that it had secured the consent of the defendant when it pledged the said motor vehicle to CFC bank.  Although the plaintiff contends that it had secured verbal agreement from an officer of the defendant, the law is clear; where there is a written agreement, the same cannot be varied or amended verbally.  It can only be varied or amended by another written agreement.  It was clear to the court that in pledging the said motor vehicle to CFC bank, the plaintiff intended to put the said motor vehicle out of the reach of the defendant.  It is in that context that this court understood the defendant’s refusal to release the said repossessed motor vehicle to the plaintiff.

Has the plaintiff established a prima facie case to entitle it to the orders sought in its application?  I do not think so.  It is an established principle of the law that he who seeks equity must do equity.  In the present application, it was clear that the plaintiff, in filing the present application, is attempting to use the court process to assist it in its wish to avoid its legal obligation to pay the outstanding amount owed to the defendant.  The plaintiff is in fundamental breach of the loan agreement in that it has pledged the security it had offered to the defendant to secure another loan from another financial institution.  I hold that in view of the plaintiff’s act of pledging the logbook of one of the secured motor vehicles, the defendant was entitled to recall the entire outstanding amount.

I therefore find no merit with the plaintiff’s application.  The same is for dismissal.  It is hereby dismissed with costs.

DATEDat NAIROBIthis17th day of JUNE2009.

L. KIMARU

JUDGE