Odhiambo v Mwananchi Credit & another [2022] KEHC 12570 (KLR)

Odhiambo v Mwananchi Credit & another (Civil Case E030 of 2022) [2022] KEHC 12570 (KLR) (Civ) (5 July 2022) (Ruling)

Neutral citation: [2022] KEHC 12570 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Case E030 of 2022

DO Chepkwony, J

July 5, 2022

Between

Victor Odhiambo

Plaintiff

and

Mwananchi Credit

1st Defendant

Leonard Chege Mwangi t/a Laar Auctioneers

2nd Defendant

Ruling

1. The subject of this ruling is the plaintiff’s Notice of Motion dated February 15, 2022 which is expressed to be brought under order 40 rule 1 and 2 of the Civil Procedure Rules and sections 1A, 1B & 3A all of the Civil Procedure Act. It seeks the following orders:-a)Spent;b)Spent;c)That the honourable court be pleased to issue an order of temporary injunction to restrain the defendants form selling or calling for any bids or otherwise interfering with the plaintiff’s interests in motor vehicle registration no KCW 305Q, pending the hearing and determination of the suit;d)That the honourable court be pleased to issue an order of mandatory injunction directing the defendants and their agents to release the motor vehicle registration no KCW 350Q to the plaintiffs.

2. The application is premised on nine (9) grounds on its face which are further explicated in the Supporting Affidavit of the applicant herein sworn on February 15, 2022. The plaintiff/applicant’s case is that he had acquired a loan facility from the 1st defendant which was advanced to him in bits of kshs 809,000/= and kshs 400,000/= in the months of April, 2020 and January, 2021 respectively. He was to repay those loans on a reducing balance basis and based on the loan agreement, he was to make a total payment of kshs 1,158,524/= on the first loan and kshs 544,196/= for the second loan facility. He argues that he made repayments in the monthly instalments as agreed save for the months of January and February, 2021 when he was unable to make the repayment on time after his business went down owing to Covid-19 ramifications. In this period, according to the applicant, the 1st defendant heaped hefty default charges and penalties on those accounts and expanded the loan facilities to kshs 1,592,818/= for the first loan while the second loan was expanded to kshs 893,450/= which the applicant describes as outrageous and against the law. Prior to that restructuring, the applicant avers that he had paid a total of kshs 1,947,000/= and considering the difference between the amounts advanced to him as against the repayments he had already done. That he has already paid the sum of kshs 823,000/= as interest and yet the 1st defendant insists on recovering a further 723,000/= as the outstanding balance.

3. According to the applicant the loan terms and the interests imposed by the 1st defendant are unconscionable and not only contrary to the provisions of the Consumer Protection Act but also an upfront to the CBK guidelines. He adds that the 1st defendant mischievously filed two applications in MCCC Misc E087 of 2022 and MCCC no E125 of 2022 which were never served on the applicant but were able to obtain repossession orders against the applicant’s motor vehicle registration no KCW 350Q with the assistance of DCI officers. Further, that the 1st defendant is not entitled to charge any default or penalty charges under the law, and it is the said charges which have thwarted his efforts to redeem the now repossessed motor vehicle. He believes that he should be reimbursed the charges imposed as penalties and be granted the orders sought in the application.

4. The 1st respondent opposed the application through the grounds of opposition dated February 23, 2021 and the Replying Affidavit sworn by Sylvia Wanjiru Njoroge, the 1st defendant’s legal officer, sworn on March 30, 2022. Its case is that the applicant, being an advocate of the High Court of Kenya executed the loan agreements and was aware of the terms therein including the default charges at the rate of 5% for every seven (7) days the overdue amount remained unpaid. The payments made would first be levied against the costs incurred in the recovery of the loan and it is averred that the applicant was aware of those terms. Since the plaintiff/applicant defaulted, it is deposited that the repossession of the motor vehicle which had been offered as collateral was lawful and within the terms of the loan agreement. As such, the 1st respondent is of the view that the plaintiff/applicant is, through this suit and the present application seeking the court to rewrite a contract which he freely agreed to the terms thereof and signed. As regards the allegations that the respondent had filed suits but failed to serve the plaintiff, the 1st defendant indeed agrees having filed MCCC no E087 of 2022 but adds that the same was withdrawn following the plaintiff’s request to settle the loan dispute out of court.

5. However, after that suit had been withdrawn, the plaintiff refused to engage in any discussions compelling the 1st respondent to file yet another suit being MCC Misc E125 of 2022 where it obtained the orders to repossess the motor vehicle under police assistance. Nonetheless, the 1st defendant maintains that the loan agreement terms and conditions thereof are lawful and applicable to all parties and not only the plaintiff. It expresses the view that if the plaintiff had issues with the loan terms, then he would have negotiated his concerns before signing the loan agreement but not whip up emotions after he has defaulted.

6. The plaintiff/applicant further swore a Supplementary Affidavit on April 14, 2022 to rebut the averments made in the replying affidavit. He averred that at the time he was advanced the 2nd loan as a top up, he was not in default. That, at no point has it been rebutted that he was advanced a total loan amount of kshs 1,158,524/= and was expected to make a total payment of kshs 1,702,720/= yet he made a total payment of kshs 1,947,000/=. He adds that as of now he has made an excess payment of kshs 244,280/= which he has severally sought to be refunded but that has not happened to date. He adds that the restructuring of the loan was contrary to section 20 of the Consumer Protection Act and that notwithstanding, the respondent failed to disclose that he had rescinded the loan agreement as provided under section 16 of the Consumer Protection Act. The plaintiff further reiterates that the default charges and penalties which the 1st defendant has so far charged to a tune of kshs 534,000/= were illegal and unprocedural. Lastly, he faults the 1st defendant for failing to justify the sum of kshs 723,000/= they are demanding as outstanding and beseeches the court to reach a conclusion that he is not obliged to settle such amounts and order the unconditional release of his motor vehicle.

7. Parties further filed written submissions in support of their arguments, and I have considered the said submissions and the cases cited thereof and find they reiterate the parties’ respective positions as summarized above in strict sense and I wish not to duplicate the same here.

Analysis and determination 8. I have duly considered the application, the affidavits sworn in support and in rebuttal of the same, alongside the submissions filed by both parties. In my view, the two issues which crystalize for determination are;(a)Whether the applicant has met the threshold for grant of temporary injunction restraining the defendant from selling or advertising for sale the motor vehicle registration number KCW 350Q;(b)Whether the applicant has made a case for grant of mandatory injunction for release of motor vehicle registration number KCW 350Q.

9. The first issue on whether a temporary injunction can issue, I have considered whether the applicant has satisfied the conditions precedent to grant of an interlocutory injunction as they were set out in the case of Geilla vs Cassman Brown & Co Ltd [1973] EA 358 which are, that an applicant for a temporary injunction must show that he has a prima facie case with a probability of success; that such injunction will not normally be granted unless the applicant might otherwise suffer irreparable injury or harm which cannot be adequately compensated by an award of damages, and if there is a doubt to the foregoing, the application will be determined on a balance of convenience.

a) Whether the plaintiff/applicant has established a prima-facie case 10. It is not in dispute that the applicant was advanced a credit facility of kshs 809,000 for the first loan which he later topped up with an additional loan of kshs 400,000/=. The said loans were to be repaid on a monthly reducing balance on agreed rates and to secure repayment, the applicant offered his motor vehicle registration number KCW 350Q as security hereof. The plaintiff/applicant admits that for some two months or so, due to challenges brought along by the Covid-19 Pandemic, he defaulted in servicing the facilities, but he eventually made the agreed instalments, although after the due date. The applicant added that he has so far made total payments of kshs 1,947,000/=, which is kshs 244,280/= more than what he was meant to pay including the interests, not to mention that he has so far paid interests to the tune of kshs 823,000/=, yet the respondents are still claiming a total of kshs 723,000/= for her.

11. The respondents have not rebutted that the applicant has paid the principal amount and in clear cut, that he has paid the total of kshs 1,947,000/=. The respondent’s case is that the plaintiff/ applicant was conscious of the terms of the facility agreement including the penalties and default charges to be imposed in the event of default. Therefore, since the applicant admits having defaulted at some point, he cannot be heard to say that the default charges and penalties were illegal.

12. In my view, and as this court and other courts have stated for the umpteenth time, although a prima facie case includes a genuine and arguable case, it is not limited to the same. Thus, the court in directing itself, should be minded to establish whether an applicant has shown the existence of rights which have apparently been infringed by the opposing party for a prima facie case to be said to exist. It will also bear repetition, for me to add that a lender is not normally restrained from exercising the statutory power of sale solely on the grounds that there exists a dispute as to the amount owing, or interest charged, or the interest rate payable. However, a lender may be restrained if it is shown that the amount claimed is excessive and unconscionable, and or the interest charged is uncontractual or illegal.

13. In this case, there is evidence that the plaintiff/applicant has repaid the principal amount advanced to him under the facility agreement and on the same, he has repaid interest to the tune of kshs 823,000. His case is that the sum of kshs 723,000/= claimed as further interests is unconscionable and illegal. In the circumstances, it is my position the position that the dispute with regard to the further interest of kshs 723,000 can be addressed as a subsidiary issue to the applicant’s obligations under the agreement. This is to say, a lender may be restrained by way of injunction from exercising the power of sale once it is shown that the borrower has repaid the principal amount pending the determination on whether the interest claimed is unconscionable and illegal. However, this is to be considered on a case to case basis and the borrower’s willingness to pay the justifiable amount must be paramount.

14. The plaintiff/applicant herein has met that threshold and I am satisfied that the instant application is neither vexatious nor frivolous since the applicant has raised serious issues for trial. I am further satisfied that on the strength of the documents annexed in this application, showing the repayments by the plaintiff/applicant, he has established a prima facie case with a probability of success.

b) Whether the plaintiff/applicant would suffer irreparable injury/loss that cannot be compensated by an award of damages if the injunction sought is not allowed. 15. The plaintiff’s case remains that if the injunction is not granted, he will suffer substantial loss by losing the motor vehicle he offered as security on execution of illegal interest amounts imposed by the defendant while for the defendant/respondent, the applicant will not suffer any substantial loss, that cannot be adequately compensated by an award of damages, the reason being that the motor vehicle was offered as security to be sold in the event of default.

16. In my view, if the injunction as sought in the application is denied and the respondent proceeds to sell the motor vehicle it has already proclaimed, the plaintiff/applicant not only risks losing the subject motor vehicle, but also the payments he has already made for the principle amount and the interest thereon, thus infringing on the applicant’s right to property before hearing and determination of the dispute. It therefore cannot be said that the plaintiff/applicant will not suffer any irreparable loss if a temporary injunction as sought is not granted.

17. Lastly, as to whose favour the balance of convenience lies, I have considered and weighed the conflicting parties’ interest in this respect and in which position the same tilts with regard to granting or rejecting the application for injunction. Consequently, this court is of the view that the applicant, having repaid the principal amount and substantial part of interest of the loan, would suffer greater harm if the injunction is not allowed and thus the balance of convenience tilts in favour of allowing the injunction.

18. With regard to the second issue pointed out for determination being whether the plaintiff/applicant has made a case for grant of mandatory injunction directing the defendants to unconditionally release his motor vehicle registration number KCW 350Q, I must reiterate that a mandatory injunction can only be granted on an interlocutory application only in the presence of special circumstances and in a clear case which the court thinks can be decided at once.

19. I associate myself with the dicta in the English case of Locabail International Finance Ltd vs Afro-Export (1988) ALL ER 901 where the court held, thus,“A mandatory injunction can be granted on an interlocutory application if the case is clear and one which the court thinks it ought to be decided at once, or if the act done is a simple and summary one which can be easily remedied or if the defendant attempted to steal a march on the plaintiff”

20. Such is not the case in the instant application since whether or not the plaintiff/applicant is bound to pay the further amounts in interest as sought by the defendants is an issue to be determined upon full hearing and consideration of each party’s evidence. The same cannot be dealt with in the instant application. Having considered the facts adduced by both sides, I am not persuaded that the case is clear for this court to grant the mandatory orders sought by the plaintiff/applicant.

21. Having said that much, it is this court’s conclusion that the plaintiff/applicant’s application is partly meritorious and is partly allowed in terms of the following orders:-(a)That pending the hearing and determination of this suit, an order of temporary injunction, do issue restraining the defendants/ respondents, whether by themselves or their representatives, servants, agents, and/or assigns from howsoever selling or calling for any bids or in any other manner whatsoever interfering with the plaintiff’s interests in motor vehicle registration number KCW 305 Q.(b)That the costs of the application shall abide with the outcome of the main suit.It is hereby so ordered.

RULING DELIVERED VIRTUALLY, DATED AND SIGNED AT NAIROBI THIS 5THDAY OF JULY, 2022. D O CHEPKWONYJUDGE