NCBA Bank Kenya Limited formerly NIC Bank Limited v Njoki & another [2022] KEHC 16079 (KLR)

NCBA Bank Kenya Limited formerly NIC Bank Limited v Njoki & another (Civil Appeal 101 of 2020) [2022] KEHC 16079 (KLR) (1 December 2022) (Judgment)

Neutral citation: [2022] KEHC 16079 (KLR)

Republic of Kenya

In the High Court at Kiambu

Civil Appeal 101 of 2020

RB Ngetich, J

December 1, 2022

Between

NCBA Bank Kenya Limited formerly NIC Bank Limited

Appellant

and

Peter Warui Njoki

1st Respondent

Lucy Waithira Wachu

2nd Respondent

(Being an appeal from the Ruling and Order of the Honourable Principal Magistrate, Hon. Ekhubi B. M delivered on 6th August 2020 in Thika CMCC No . 707 of 2019)

Judgment

1. The 1st Respondent filed the suit against the Appellant and the 2nd Respondent on November 11, 2019 through plaint filed together with a notice of motion filed under a certificate of urgency seeking the following orders:-a.A permanent injunction to restraining the Appellant and the 2nd. Respondent jointly and severally the sale, transfer or dealing with Motor Vehicle registration no. KCJ 035T.b.A declaration that the 1st Respondent is not in breach of his obligation as per the sale agreement dated January 8, 2020 and the seizure and repossession of the motor vehicle were illegal.c.A mandatory injunction compelling the Appellant and 2nd Respondent to hand over to the 1st Respondent motor vehicle KCJ 035T.

2. In response to the application, the Respondnet filed a replying affidavit sworn by Stephen Atenya the Respondent’s Senior Legal Counsel On November 27, 2019. He pointed out that the 2nd Respondent lacked the capacity to enter into a contract with the 1st Respondent. That the motor vehicle was jointly owned by the Appellant and Memuka Bros Hardware as per the hire purchase agreement dated June 14, 2012 where the appellant advanced a sum of Kshs 4,730,886/ to Memuka Bros Hardware for the purchase of motor vehicle registration number KCJ 035T. He attached a copy of the hire purchase agreement between Memuka and the appellant with the 2nd Respondent as one of the signatories and Director of Memuka Bros Hardware.

3. The notice of motion dated November 11, 2019 was canvassed through written submissions and the trial magistrate delivered a ruling on August 6, 2020 allowing the application on condition the 1st Respondent adhered to condition 7 of the agreement dated January 1, 2019 as follows:-‘’condition 7 of the agreement“ in case of breach of a contract the party in breach shall pay the aggrieved party Twenty (20%) per centum of the consideration herein as liquidated damages.’’

4. The appellant being aggrieved by the above ruling filed the memorandum of appeal citing the following six (6) grounds:a.The learned Magistrate erred in law and in fact by finding that the 1st Respondent had demonstrated the presence of special circumstances to warrant the issuance of a mandatory injunction in favour of the 1st Respondent compelling the appellant and the 2nd Respondent herein to release the suit motor vehicle KCJ 035T to the 1st Respondent pending the hearing and determination of the suit.b.The learned Magistrate erred in law and in fact and in recognizing and enforcing the agreement for sale entered into between the 1st and 2nd Respondents and dated January 8, 2020, yet they lacked the capacity to contract.c.The learned Magistrate erred in law and in fact by failing to consider that the Appellant was a secured creditor and joint owner of the suit motor vehicle KCJ 035T together with the borrower, Memuka Bros Limited.d.The learned Magistrate erred in law and in fact in failing to consider that there was no privity of contract between the appellant and the 1st Respondent.e.The learned Magistrate erred in law and in fact by failing to appreciate that a company has a legal personality separate from its directors and shareholders.f.The learned Magistrate erred in law and fact by failing to consider all the evidence on record before allowing the 1st Respondent’s Application.

5. The appeal was canvassed by way of written submissions. Only the appellant submissions are in the file. The 1st Respondent pointed out that he had filed submissions on June 16, 2022. The court directed the submissions be placed in the court file. The directions have not been complied with. The 2nd Respondent has not participated in the appeal despite service.

Appellant’s Submissions 6. On behalf of the appellant, the firm of Nyaanga & Mugisha Advocates filed submissions on May 16, 2022. Counsel raised two (2) issues for determination as follows:a.Whether the learned Magistrate erred in law and in fact by finding that the 1st Respondent had demonstrated the presence of special circumstances to warrant the issuance of a mandatory injunction compelling the appellant and the 2nd Respondent to release the suit motor vehicle to the 1st Respondent pending the hearing and determination of the suit.b.Whether the trial Magistrate erred in finding that there was no privy of a contract between the appellant and 1st Respondent.

7. On the first issue, counsel submitted that the 1st Respondent failed to demonstrate the presence of special circumstances to warrant the issuance of a mandatory injunction and cited the case of Nation Media Group & 2 others vs John Harun Mwau (2014) eKLR where the court stated as follows:-‘‘it is trite law that for an interlocutory mandatory injunction to issue an applicant must demonstrate the existence of special circumstance. A different standard higher than that in prohibitory injunction is required before an interlocutory mandatory injunction is granted.’’

8. Counsel submitted that the agreement for sale between the 1st and 2nd Respondent was void ab initio as there was a previous contract between the appellant and the 2nd Respondent for the sale and purchase of the subject motor vehicle which the 2nd Respondent defaulted in repayment and the appellant was to repossess the motor vehicle; that the 2nd Respondent was not the owner of the suit vehicle at the time they entered into a contract on January 8, 2020.

9. Counsel further submitted that the nemo dat quod non habet principle is applicable as one cannot sell what they do not own; the appellant had an overriding interest in the motor vehicle as a registered owner.

10. On the second issue, counsel submitted that the trial court erred in failing to consider there was no privity of contract between the Appellant and the 1st Respondent. The appellant was never listed as a party to the contract for sale dated January 8, 2020. The appellant knew about the said contract after the institution of the trial court suit.

11. Counsel further submitted that according to the doctrine of privity of contract, a contract cannot confer rights to impose obligations on any person who is not a party to the contract. The agreement dated January 8, 2020 cannot be enforced against the appellant.

12. Counsel urged the court to allow the appeal and relief prayers sought.

Analysis And Determination 13. This being the first appeal, I am obligated to re-evaluate the evidence of the trial court and come up with my own conclusion. I am however minded of the fact that unlike the trial court, I did not have the chance to hear witnesses and observe their demeanor, for this I give due allowance. This position was held in the case of Selle & Another Vs Associated Motor Board Company Ltd [1968] EA 123, where the court held as follows:-“...this court is not bound necessarily to accept the findings of fact by the court below. An appeal to this 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..."

14. Record shows that there are two contracts in regard to Motor Vehicle KCJ 035T. The first contract is between the appellant and Memuka Bro Hardware; the appellant did finance Memuka Bros Hardware for the purchase of the motor vehicle in question. The 2nd Respondent was one of the directors of Memuka Bros hardware and she attested to the hire purchase agreement entered in the year 2013. The second agreement entered on January 8, 2020 is between the 1st and 2nd Respondent.

15. From the evidence adduced, it is not disputed that Memuka Bros Hardware defaulted in the payment of the loan to the appellant. The default resulted in the Appellant’s action to repossess the said motor vehicle. On repossessing the said vehicle, the Appellant learnt that it was in the possession of the 1st Respondent having been sold by the 2nd Respondent to the 1st Respondent as per the contract of January 8, 2020 without the consent of the Appellant.

16. The appellant’s intention of repossessing the vehicle was to recover the loan amount. At the same time, the 2nd Respondent repossessed the motor vehicle and sold it to a third party when the 1st Respondent also defaulted in making monthly payments.

17. An applicant seeking mandatory injunction must establish the existence of special circumstances.The standard of proof required in the application is higher than the standards of prohibitory injunctions.

18. In the case ofKenya Breweries Limited & Anor Vs Washington O. Okey (2002) eKLR the court of Appeal stated as follows:-‘’It is trite law that a contracting party who fails to perform his part of the contract cannot obtain an injunction to restrain a breach of covenant by the other party.’’

19. It is not disputed that the 1st Respondent was in arrears in payment of the purchase price which led the 2nd Respondent to seize and repossess the motor vehicle.

20. From the record, the 2nd Respondent failed to disclose to the 1st Respondent about the existence of the contract between Memuka Bros Hardware and the appellant. In view of the fact that the said contract was still subsisting, the 2nd Respondent lacked the capacity to contract with the 1st Respondent.

21. From the foregoing, the 2nd Respondnet was not deserving relief of mandatory injunction. I proceed to find that the trial Magistrate erred in issuing an order of mandatory injunction against the Appellant herein.

FINAL ORDERS: 1. Appeal is hereby allowed.

2. Order of mandatory injunction issued in favour of 1st Respondent and against the appellant is hereby set aside.

3. Costs of the Appeal to the Appellant.

JUDGMENT delivered, dated and signed virtually atKiambuThis1st day ofDecember, 2022. ………………………………RACHEL NGETICHJUDGEIn the Presence of:Kinyua/Martin – Court AssistantNo Appearance by Parties