National Bank of Kenya Ltd v Tachasis Wholesalers Ltd [2022] KEHC 10349 (KLR)

National Bank of Kenya Ltd v Tachasis Wholesalers Ltd (Civil Appeal 66 of 2019) [2022] KEHC 10349 (KLR) (19 May 2022) (Judgment)

Neutral citation: [2022] KEHC 10349 (KLR)

Republic of Kenya

In the High Court at Eldoret

Civil Appeal 66 of 2019

RN Nyakundi, J

May 19, 2022

Between

National Bank of Kenya Ltd

Appellant

and

Tachasis Wholesalers Ltd

Respondent

Judgment

Introduction & Background 1. The appeal herein was brought by the appellant vide memorandum of appeal dated the 13th of June 2019 seeking to set aside the decision of Hon. E. Kigen delivered on the 17th of May 2019 in Eldoret CMCC No.904 of 2012.

2. The factual matrix leading to the instant appeal is that the respondent herein filed a suit on the 7th of December 2012 before the lower court seeking orders directing the defendant (appellant) to release to it loan application letters, approval letters for the loan, copies of the letter of offer and acceptance and statements of account showing when the plaintiff (respondent) made the first drawing. The respondent also sought for costs of the suit.

3. The facts leading to the above suit is that the plaintiff was in fact the defendant’s customer operating account numbers 401-003-043 and 401-009-750 and was advanced loans by the defendant during which transactions the following documents were executed; -a.Loan Application lettersb.Approval letters of loansc.Letter of offer and conditions and acceptance letterd.Statements indicating the first drawing.

4. The plaintiff’s proprietor executed the documents and handed the same to the defendants to facilitate the loan approval and thereafter he demanded the return of the said documents. However, the defendant without assigning any or any valid reason failed and or refused to hand over the said documents to the plaintiff necessitating the plaintiff to file the above suit before the lower court.

5. The defendant entered appearance on the 19th of November 2012 and filed a defence dated the 20th of November 2012 wherein it denied the contents of the plaint but admitted having advanced a loan to the plaintiff but denied being in possession of the listed documents. The defendant further denied that it had failed and or refused to hand over the loan documents to the plaintiff as they are not in their possession. Finally, the defendant averred that it if at all it retained any documents, then the same are internal memorandums which are the bank’s confidential documents.

6. In support of its case, the plaintiff called a single witness while the defence called two witnesses.

7. PW1, Hassan Kosgey testified on the 2nd of March 2016 that he is the owner of the respondent herein and that he wants the bank to give him his documents namely the loan application forms and acceptance forms and all the loan documents from the bank. He also sought for his loan statement. He testified that he asked the bank for the statement but the bank never responded nor give him the documents.

8. On cross-examination, PW1 testified that he did not sign the documents and cannot remember the date of the application. He however testified that he gave the documents to the Bank Manager S.N Mburu and that all he wanted were his documents from 1990 to date. He reiterated that he requested the bank for the documents but the same were never granted.

9. DW1 Paul Kipkore Chelanga testified on the 6th of September 2017 that he is an employee of the appellant’s recovery manager head office. He adopted his recorded statement dated the 3rd of November 2014. He testified that the respondent herein was a customer at the bank and was advanced loans in 1988 but failed to service the same. In turn, the bank attempted to sale its security but the respondent moved to court and obtained injunctions vide Eldoret CC. No 325/97 and CC No.59/2000 which aborted and dismissed respectively. DW1 testified that the documents the respondent is seeking had been requested earlier by the respondent but that the request was dismissed by court. In any case, he testified that the loan application letter is a document that the bank expects to be in custody of the respondent.

10. On cross, DW1 testified that they are unbale to produce the documents despite admitting that the plaintiff/respondent applied for a loan by way of a letter which loan was approved and letter of approval issued. On re-examination, DW1 testified that the documents mysteriously disappeared from the bank as well as their advocates.

11. DW2, one Peter Titi testified on the 14th of August 2018 that he was attached to the High Court Civil Registry and by extension, the archives. He produced civil file no 59/2000 and 375/97 as exhibit in court but informed court that they have not managed to trace file no.59/00. On re-examination, DW2 identified the securities in question as Eldoret Municipality block 5/46 9/47, block 70/Kapyemit/38.

12. On the 17th of May 2019, the lower court delivered its judgment in favour of the plaintiff/respondent and granted it the prayers sought.

13. Being dissatisfied with the above judgement, the appellant preferred the instant appeal on 11 grounds.

14. By direction of court, the appeal was canvassed by way of written submissions. Both parties have filed their respective submissions which the court has thoroughly considered.

Determination;The LawI venture to assert as one court in Federal Sav. & Loan Ins Corp. v Molinaro, 889 F.2d 889, 904(9th Cir. 1989) stated as follows “The heightened duty inherent in a fiduciary relationship justifies imposing liability for breach of that duty regardless of good faith or lack of damage to the beneficiary, because such a standard "is not based on harm done to the beneficiary in the particular case, but rests upon a broad principle of preventing conflict of opposing interests in the minds of fiduciaries, whose duty it is to act solely for the benefit of their beneficiaries. Generally, there are two types of fiduciary relationships: (1) those specifically created by contract such as principal and agent ... and (2) those implied in law due to the factual situation surrounding the involved transactions and the relationship of the parties to each other and to the questioned transaction." Id. The analytical focus of this article is on "relational" fiduciary obligations rather than "contractual" ones.” See Denison State Bank v. Madeira, 640 P.2d 1235, 1241 (Kan. 1982).It is worthy to note that the banking industry is highly regulated by the law and financial policies framework for it performs vital public services substantially affecting its customers and the welfare of the public. Hence the need to extend the special fiduciary model in its operations. Therefore any inadequacy to live up to the highest total quality service management may call for judicial remedies. The knowledge and expertise possessed of the bank justifies the imposition of an express trustee standard of behavior upon it likely to occasion liability. The principle is applicable to the instant case. 15. After carefully considering the parties pleadings, submissions and annextures, it is my finding that the 11 grounds of appeal can be condensed into a single issue for determination and that is whether the trial magistrate erred in law and fact in granting the prayers sought in the plaint.

16. The appellant in its submissions was of the opinion that the trial magistrate indeed erred in dismissing their case and granting the respondent the orders sought in the plaint without what it referred to as legal justification. It was its submissions that the documents requested by the respondent is in its possession and further noted that this is the reason the court in related suits Eldoret HCC No.325 of 1999 and 59 of 2000 declined to grant the respondent similar orders. In any case, the appellant submitted that the respondent ought to have kept safe its documents considering that the bank supplied it with duplicate copies as per DW1’s testimony.

17. Furthermore, the appellant submitted that the request for documents is a desperate and escapist move by the respondent to avoid paying the debt and to stop the bank from exercising its power of sale. In this regard, the appellant relied on the case of Amos Wangera & 9 others vs Serah Wamuyu Muriuki & another[2014] eKLR and National Bnak of Kenya Ltd vs Pipeslastic Samkolit (K) Ltd & another [2001] eKLR and urged court to allow the appeal.

18. The respondent on the other hand submitted that its case was proved on a balance of probabilities taking into account that DW 1 testified that the requested documents mysteriously disappeared from the bank as well as advocates and they only have in possession the charge document. Finally, the respondent submitted that no proof has been tabled to show that the appellant submitted to the respondent the documents required. It thus urged court to dismiss the appeal and affirm the lower court’s decision.

19. I recognize that this being a first appeal there is an obligation placed on this court to re-evaluate the evidence and come to its own independent conclusion.

20. The main issue here is the issuance of the documents by the appellant to the respondent. The respondent wants the loan application form/letters, approval letters of the loans, copies of the letter of offer and acceptance and statement of account showing when the respondent made the first drawing.

21. From the evidence, it is clear that the respondent is a customer of the appellant and operated account numbers xxxx and xxxx. This was confirmed by DW1. It is also clear that despite attempts to have the bank furnish him with the aforementioned documents, the appellant has not released the same to the respondent. The reason is unclear in my view.

22. On one hand, the appellant argues that the said documents are in the custody of the respondent since he was given copies thereof while on the other hand, the bank argues that the said documents ‘mysteriously’ disappeared from the appellant and its advocate. I find this admission by the bank excessively worrying.

23. As a financial institution, the appellant is expected to be have safe and secure storage system considering the nature of information it has on clients. To simply state that the documents disappeared from the bank’s storage is to treat matters of clients’’ information casually which may in turn expose the clients to risk. In addition, I wonder how counsel for the appellant expects the respondent as a company to have safe storage of its documents while he cannot attribute the same responsibility on his client, the appellant herein.

24. This Court in Jack Kaguu Githae vs Kenya Commercial Bank Limited & 2 others [2021] eKLR noted that; -“….1st defendant/1st Respondent is a bank and in my view, documents in the bank are expected to be safe, secure and available.”

25. I agree with the court’s finding that as a commercial institution, the appellant bank is expected to have a safe and secure storage system for its documents which should be easily available whenever needed by the customer or a court of law. This is because, failure to have the documents available may occasion prejudice to the other party.

26. For example, in the instant case, on what basis would the appellant bank proceed to exercise its power of sale without documentation showing the amount loaned to the respondent, statement of account that would show drawing of the money, loan approval forms and approval letter. To proceed and sale the securities without any basis would amount to an arbitrary act.

27. There is sufficient evidence to show that despite numerous attempts through letters addressed to the appellant’s bank by the respondent, the bank has never responded to any of the letters. Those letters date back to 1999 where the respondent complain of unwarranted entries appearing in their accounts. The same can be gleaned from pages 9-17 of the record of appeal. No response has ever been given.

28. I therefore see no reason why the respondent should not be granted these documents. I also see no sense in the bank’s argument that the same if retained were the bank’s confidential documents considering that the person seeking them is the director of the respondent. The same person that took the loan. There is therefore nothing confidential between the bank and the respondent as regards the requested documents.

29. In the end, I see no reason to set aside the decision of the lower court. The same is hereby affirmed in the following terms; -a.That the loan application letters, approval letters of the loans, copies of the letter of offer and acceptance and statements of account showing when the respondent made the first drawing be supplied to the respondent.b.Compliance of Order 1 above within 14 daysc.The respondent shall have the costs of the appeal and the costs in the court below.

30. Orders accordingly.

DATED, SIGNED AND DELIVERED VIA EMAIL AT ELDORET THIS 19TH DAY OF MAY, 2022. ............................R. NYAKUNDIJUDGE