Titus Gitau Ngugi v Chase Bank Limited & Ann Wanjiru Kananda [2016] KEHC 5914 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT NAIROBI

CIVIL CASE NO.226 OF 2015

TITUS GITAU NGUGI ……………….……….............………PLAINTIFF

VERSUS

CHASE BANK LIMITED ……….…………….....……1ST DEFENDANT

ANN WANJIRU KANANDA……………………….2ND RESPONDENT

RULING

This ruling determines the plaintiff/applicant’s application dated 17th June 2015 filed on 18th June 2015 under certificate of urgency.  The application seeks orders that:

1. Spent

2. Spent

3. Pending  hearing and determination  of this suit  the 1st defendant, themselves  their agents  and or their  employees  or anyone  or any officers  working under them be restrained  by an order of injunction from  repossessing, interfering, alienating and or otherwise dealing with motor vehicle  registration No.  KBW 254J.

The application is predicated on the grounds that:

a) The plaintiff is the owner of motor vehicle registration number KBW 254 (Range Rover) having bought the same from the second defendant for valuable consideration in the total sum of kshs 6. 2 million pursuant to a sale agreement dated 14th October 2013.

b) The 1st defendant has through its agents attempted to repossess the same premised   on an alleged debt of kshs 2. 7 million owed to it by the 2nd defendant.

c) By the sale agreement aforesaid the plaintiff paid a total of sum of kshs 6. 2 million.

d) The plaintiff  has no legal or contractual  liability  or  relationship to the 1st defendant  and is  a stranger to any alleged  debt owing   or involving  the 2nd defendant.

The application was further  supported  by an affidavit  sworn by  Titus  Gitau Ngugi on 17th June 2015  wherein he deposes  that he purchased  the subject motor vehicle from one  Anne Wanjiru Kananda  the 2nd  plaintiff  at an agreed  sum of  kshs 6. 2  million on 14th October  2013 which  sums  he duly paid and that the  said Anne  Wanjiru  Kananda  undertook  to indemnify  him for any claims  that could possibly  arise from  any third parties. That contrary to the terms of the sale agreements, the 1st  defendant  has laid  claim to  the said  motor vehicle and send auctioneers  to purport  to repossess it  yet  he is  not privy to any arrangement  affecting  the said car save  that he  deposited  cheques  into the  2nd defendant’s account  with the  1st defendant  hence he  was a  bona fide  purchaser for value  without  notice and  therefore  the 1st defendant  is in no way justified  in repossessing  the subject  motor vehicle  which act  amounts to  trespass to property.

Further, that the plaintiff had severally asked for transfer of the logbook from Anne to his name in vain hence the cause of action herein.  The plaintiff annexed copies of payment vouchers, sale agreement and copy of logbook to his affidavit   in support.

The 1st defendant opposed the plaintiff’s application and filed a replying  affidavit sworn by  Kevin Kimani on 3rd July  2015  deposing  that the application is riddled  with dishonestly and calculated  to resist  the 1st defendant’s right  to enforce  a  Chattels and Mortgage  Instrument which  grants it the right to repossess the motor  vehicle  registration No.KBW 254J.  That the  2nd defendant applied and was  granted a banking facility  by the 1st defendant for kshs 3 million  on terms  of Chattels  Mortgage created over the subject  motor vehicle  and she  voluntarily  deposited  the  subject  motor vehicle’s log book which  was retained  for finalization of  registration of the Chattels Mortgage  to protect the 1st defendant/bank’s interest, which registration took  effect  on 23rd October 2013.  That the plaintiff should therefore  have known of the registered Chattels Mortgage  instrument  affecting  the subject  motor vehicle  hence he should  have sought  consent  of the 1st defendant before  dealing  with the 2nd defendant.  That the 1st defendant  sought to  repossess the motor vehicle for reasons  that the  2nd defendant  had stopped  remitting  the loan payments  amounting to kshs 2,795,875. 37  as at  23rd June  2015.

That the  plaintiff’s conduct  in the  purchase of the subject motor  vehicle  shows that  he had constructive /implied  knowledge of the joint  registration  of the motor vehicle between the 1st and 2nd  defendants  that is why he never did a search or even ask for  its  logbook. It  was also deposed that the  purported  sale agreement  must have been  prepared  for purposes  of these proceedings hence it  should  be disregarded  and that in  view of  the legal interest  that the 1st defendant  has shown  in the motor vehicle, the plaintiff  has not  established  a prima facie  case with  a probability  of success; and the balance of  convenience  tilts  in its favour  and that there  is no explanation  why  the sale  was allegedly  concluded  in December  2013 but he  did not seek orders  of specific performance  as a purchaser.  It prayed for dismissal of the application with costs.

The plaintiff with  leave of court  filed  a further affidavit  on 31st July 2015 contending that he  was not  privy to the Chattels Mortgage  instrument executed  between  the defendants  and that following  the sale agreement  he deposited   monies into the  2nd defendant’s account in full after  the 2nd defendant  showed  him a copy of  log book which  had no interest  of the 1st defendant  and she  promised to avail the original log book hence  he is a purchaser for  value  without  notice  of the vehicle  being jointly registered  in the two  defendants’ names.

That payment  of the entire  purchase price to the 2nd  defendant  raises  a prima facie  case and  that he could not have  rushed  to court immediately after meeting  his part of the bargain.

The 2nd defendant did not respond to the application despite service of process upon her.

The respective parties’ advocates canvassed the subject application orally before me on 2nd December 2015.  Mr Madara counsel for the plaintiff submitted relying on the grounds, supporting  and further affidavit sworn  and  filed by the plaintiff and some  authorities  and annextures, maintaining  that the plaintiff had demonstrated  that he  was a bona fide  purchaser  of the subject  motor vehicle  for  value without  notice since he  had also surrendered  his motor  vehicle KBB 872H valued at  kshs 600,000 to cover  part of the  purchase price after paying  cash  shs  2 million  as a trade in.  It  was further submitted that the  Chattels  Mortgage is dated  20th November  2013 about one  month after the sale agreement  was executed and that it appears that the 2nd defendant  mortgaged the  motor vehicle after receiving  purchase  price from the plaintiff and  after  giving  possession of the purchased  motor vehicle  to the plaintiff.  He relied on Section 19  of the  Sale of Goods Act  and maintained  that  he  was the  bona fide  owner of  the subject  motor vehicle.  He also relied on the Sections 14, 15 and 16 of the Chattels Transfer Act, Chitty on contracts; Bullen Leake Precedent of Pleadings; Wagichiengo V Gerald 1988 KLR page 400; and Ugenya BusServices s V Gachoki [1970-1985].

Mr Chenge  for the 1st  defendant  submitted  relying on the replying affidavit  filed on behalf of the 1st defendant  bank and  urged the court to  dismiss the application by the  plaintiff  with costs   since he  had not satisfied  the conditions  for grant of interlocutory injunction. Further, that as there was no  property registered,  the sale agreement  which was not registered as  required by the Stamp Duty Act, and  as the plaintiff  had refused  to produce the  original  agreement despite notice   to produce  served  upon him, he  had no cause of action against the 1st defendant   as the agreement  was  inadmissible.  In the alternative it was  submitted that should the court find that  agreement  admissible  then the said sale agreement  of 14th October  2013  had conditions that  the 2nd defendant  would  indemnify the plaintiff.

Further, that before the last condition of 15th December 2013 the 1st defendant had already registered an interest into the subject motor vehicle. In addition, that the plaintiff had not produced any document from the Registrar of motor vehicles to prove ownership thereof.  And  that  in the absence  of evidence of payment of any money to the 2nd defendant  as no bank  transfer  was shown; and that as  the payment vouchers had no  nexus  with the plaintiff, the  sale agreement  was  purposively  made for  this suit.  In addition, that there was no evidence of how motor vehicle KBB 872H was transferred to the 2nd defendant as such no prima facie case had been made out.

On irreparable loss, it was submitted that the agreement was clear that the 2nd defendant would indemnify the plaintiff.  Further, that should the orders be confirmed then a mandatory injunction will have been issued against the 1st defendant in the unclearest of all cases. As the 2nd defendant   had not responded to the claim it was submitted that the agreement    for sale and payment vouchers   were prepared to defeat the Chattels Mortgage instrument.  The 1st defendant’s counsel urged the court to dismiss the plaintiff’s application.

Mr Wageni counsel for the 2nd defendant attempted to submit on points of law but ventured into factual matters hence he was stopped by an objection raised   by Mr Chenge which objection was upheld by the court.

I have carefully considered the  plaintiff’s application, grounds, annextures, further  affidavits, statutory  and case law  relied on as well as  the 1st  defendant’s replying affidavit  and the parties’ advocate’s  rival submissions  in court on 2nd December  2015.

The only issue for determination in this application is whether the plaintiff/applicant has made out a case for the grant of an interlocutory injunction sought.

The conditions for the granting of an interlocutory injunction were set out in the Giella V Cassman Brown & Company Ltd [1973] EA 358 at page 360 where   it was stated:

“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 (EA industries V Trufoods [1972] EA 420)”

Applying  the above principles  to this case, on the  first condition  as to  whether  the applicant  has shown  that he has a prima facie  case  with a probability  of success, it becomes  necessary to examine  the pleadings.  In the plaint dated 17th June  2015, it is  alleged  that the  plaintiff  by an agreement  dated 14th October  2013  purchased  motor vehicle  KBW 254J from the 2nd defendant  at a total cost of  shs 6. 2 million  which amount  was paid  in full as  per the  terms of the  agreement.  The 2nd defendant undertook to indemnify the plaintiff for any claims or claim that could possibly arise from any third parties.

The plaintiff  alleges that contrary to the terms of the agreement, the 1st defendant  Chase Bank Ltd  had  unwarrantedly and without justification sent auctioneers  to repossess motor vehicle KBW 254J (Range Rover ) on the basis  of a  debt allegedly  owed to it by the 2nd defendant.  He averred  that he  is a stranger to the 1st defendant  and did not  know the basis   for the repossession since he  was not privy to and had no knowledge  of any contractual or legal relationship between  the 1st defendant  and 2nd defendant  and that  he was a buyer  for value  without notice  and therefore sought  for specific performance  of the agreement  dated  14th October  2013 and or damages for breach of  contract.  He also sought to  permanently  injunct  the 1st defendant from repossessing, interfering, alienating  and or otherwise  dealing with motor  vehicle KBW 254J  and a declaration that he is the legal bona fide  owner of the  subject  motor vehicle  plus costs of the suit.

The above facts are the basis for the application dated 17th June 2015 under certificate of urgency. To the plaint and   supporting affidavit  the plaintiff/applicant  annexed  payment vouchers “TG 1” dated 13th November 2013 for  2 million payable to Ann Wanjiru Kananda the 2nd  defendant by MEA Ltd, “TG 3” dated 16th October 2013  for  200,000 to the 2nd defendant  by MEA Ltd, motor vehicle sale agreement dated     14th October  2013  between  the plaintiff  and 2nd defendant   at an agreed  price  of shs  6. 2  million payable as follows:-

1. 2 million to be paid upon appending signature on the sale agreement   and receipt of a blank motor vehicle transfer form.

2. 2 million on or before   15th November 2013 and upon effective transfer of the motor vehicle at KRA from seller to buyer.

3. Kshs 1. 6 million on or before 15th December 2013.

In addition, the agreement  stipulates that  the buyer  had given out  a van Toyota Granvier KBB 872 H  to the seller on  an  as is  where the basis  being part of  the shs  600,000.  The motor vehicle KBW 254 J was said to be already in possession of the buyer.

The plaintiff also annexed copy of registration certificate No. 20132590741 in favour of the plaintiff being the first original owner thereof   ‘TG 5’.

The question therefore is, do the above facts establish a prima facie case with a probability of success?  I think not and proceed to give reason for my findings. First, it that the agreement is clears that clause B that the seller undertook to indemnify the buyer for any claim that may arise from the third parties.  It  therefore follows that the plaintiff’s claim lies as against  the 2nd defendant  wholly, which  2nd defendant  has  not responded  to the application to explain  the circumstances under which the 1st defendant third party came  to lay claim to the subject motor vehicle.

Secondly, there is  absolutely no nexus  between  the payment  vouchers annexed to the supporting affidavit  and the  plaintiff’s  purported payments to  the 2nd defendant.  The   plaintiff did not  attempt  in his pleadings, grounds or supporting  or even further affidavit, or submissions  to explain  how MEA Ltd  was making   payments  to  Anne Wanjiru  Kananda  on the two occasions  a sum of kshs  2,200,000. The document against which the purported cheque payments, without even quoting the bank on which the cheques were drawn were not annexed to the affidavit.

Albeit the allocation code and name of Mr Gitau’s account was given, Mr Gitau the plaintiff has not   explained why MEA Ltd was paying the 2nd defendant on his behalf.

Third, is that examining the sale agreement particulars and the application for facility form ‘KK1,’ I find that the 2nd defendant’s address as given is not uniform.  On the sale agreement  dated  14th October 2013  it is  Box number  103688 Nairobi  without  even a code  number  whereas on the application form  for the facility it is 41286-00100 GPO Nairobi.  It is dated 24th September 2013.

In addition the 1st defendant’s  annextures  ‘KK1’ shows that  on 15th October 2013  a day after the 2nd defendant  purported  to sell the  subject  motor vehicle  to the plaintiff, she signed  a Chattels Mortgage  instrument  with the 1st defendant for  an overdraft   facility  of shs  3,000,000 which she  had applied  way back on 24th September  2013 before the  purported sale  and she went ahead  to execute  all other documents  to facilitate the registration of the 1st defendant’s  interest in the motor vehicle, in lieu of the overdraft  facility.

The 2nd defendant’s address given on the registered Chattels   Mortgage   on 20h November 2013 KK-3 is 41286-00100 different from the one she gave in the sale agreement dated 14th October 2013 and she did undertake to service her overdraft facility faithfully and promptly and in default, the lender would have to repossess or collect and remove the vehicles, sell or let   the vehicle.

From the terms of the Chattels  Mortgage  instrument  which was  signed  after the  purported  sale of  the subject  motor vehicle, this court  can infer that  the 2nd  defendant’s agreement  for sale of the subject  motor vehicle to the plaintiff  was a sham.  She knew in her mind that she was entering into an arrangement that bound her legally.  The  motor vehicle  she was mortgaging, she  had purportedly sold it  and received  all the purchase  price and even  passed over possession  to the plaintiff yet she was covenanting  to allow the 1st  defendant  inspect  it and  even  repossesses it in  the event of default  in the loan repayment.

In my view, the plaintiff was under an obligation to have the motor vehicle that he had purchased registered in his names.  In accordance with the 2nd condition of   the sale agreement.  Albeit he alleged  that he  had been asking   for the  original log book  which the  2nd defendant  promised to avail  in vain, two  and half years  was too long  for him to wait for legal documents  relating  to the subject  motor vehicle.  In addition, this court finds  the sale agreement  suspect  in that it was entered  into a day before  the 2nd  defendant entered  into another  transaction of a chattels Mortgage  facility with the 1st  defendant, and  a month after the  2nd defendant  applied  for the  said facility.

Albeit  the plaintiff contends that he is an  innocent purchaser for value  without notice, and  which purchase  came before  registration  of the Chattels  Mortgage  instrument  on the subject   motor  vehicle, I find that  the 1st defendant  too has good legal  title  to the motor vehicle  and is equally  an innocent   purchaser  of the legal interest  for value  without  notice of  the  plaintiff’s  purported  earlier purchase  and  or taking of possession with  the plaintiff  claiming  an equitable  interest   whereas the 1st defendant claims  a legal  registered interest, I find that  the        1st defendant  is the first  in time  and is therefore  is stronger in law. Furthermore, equity follows the law and not the reverse.

The  authority  of Ugenya Bus  Service  V Gachoki EA LR [1976-1985] EA gives  a very valid point of  law that in the passing  of property  in goods, part  payment  of purchase  price  accompanied by physical delivery of goods to purchaser  without formal transfer of title  to goods-property passes  by  delivery of goods to purchaser.  However, that case must  be  distinguished  from the current  case in that in that  case, it concerned  a denial of ownership  of an accident motor  vehicle  on the ground that it never belonged to the plaintiff, for reason that  it  was not registered  in his name.  The principle  laid down by that court  was no doubt  correct on all fours  since Section  8 of the Traffic Act  is clear  that  the person in whose name  the  motor  vehicle  is registered  is prima facie the owner thereof  unless  the contrary is proved.  In that case, the contrary evidence was that of purchase, part payment and taking possession thereof.  The case never  concerned  circumstances  as these  where  there was an alleged  purchase yes  as alleged, but  the 1st  defendant  too had a registered interest  under a Chattels Mortgage  instrument without notice   of prior sale  and or parting  with possession of the vehicle to the plaintiff.  Albeit  the plaintiff also  relied on  Chitty  on Contracts  without  submitting on  exactly what he  wished the court  to adopt  as the legal position from those writings,  and that  notwithstanding, I have  perused the authoritative write up  and I am satisfied  that the interest that  the 1st defendant has in the suit  motor vehicle  is as good as the equitable  interest  which the  plaintiff claims to have over the subject motor vehicle.  In both instances there was ‘consideration’.  Nonetheless, the circumstances of this case are totally different from those where the court would be asked to strictly interpret a sale of goods contracts. It involves conflicting interests.  In as  much as  there may have been a contract  between the  plaintiff  and the 2nd  defendant, that contract  is only enforceable  as between  those parties to it.  The plaintiff has a right to be indemnified by the 2nd defendant, as per his contract   with her. In view of the fact that there is a claim by the 1st defendant raised on the subject motor vehicle as was contemplated in the sale agreement.  That is what was held in the case of WagichengoV Gerald CA 72/1984 [1988] KLR 408.

On  the issue of the traded  in vehicle, it  could be considered an exchange but that notwithstanding , there must be  evidence  of the plaintiff  too passing  off title  of the exchanged  motor vehicle  to the 2nd  defendant.  There  was none  and therefore I agree  with  1st  defendant’s  submission  that  most probably, it was a contract  of convenience  to defeat the claim by the  1st defendant bank.

I warn myself that I am not fully determining the merits or demerits or the finality of this case at this stage.  But I have  to make some analysis  of the case to establish whether  in my view  the plaintiff has shown a prima  facie case  with a probability  of success.  In the end I find that a prima facie case with a probability is success has not been made out.

On the second condition of whether the plaintiff/applicant  shall otherwise  suffer  any irreparable  injury which would  not adequately be compensated  by an award of damages, I note   that the  1st defendant is a stable   financial institution.  In addition, the 2nd defendant  as per the  Chattels Mortgage  documents and  curriculum vitae  is a car dealer  and in the sale agreement   she undertook  to indemnify  the plaintiff against  any claims by third parties  which clearly show that  she was conscious  of the situation  that the plaintiff might  find  himself in requiring compensation. For that reason I find that  the  plaintiff has not demonstrated  that he stands to  suffer any  irreparable  injury that  cannot be  compensated   by an award of  damages.

I must mention that at the commencement of these proceedings there was every indication that the plaintiff   and the second defendant were negotiating for a possible settlement of the matter out of court.  The  plaintiff has not placed  any  material  before  this court  which would  tend  to show that  an award  of damages  cannot adequately compensate him for the  loss of  the suit  motor vehicle in the event that  the 1st  defendant repossesses   it and   disposes  it off  before this  suit is heard and  determined.  Furthermore, he ought to have known the risks of possessing a motor vehicle whose original logbook he had not seen for over two years.

I therefore think that the second limb of the  Giella V Cassman Brown  case has not  been satisfied  and to that extent  I need not  consider the  last limb  which espouses  that in case  I am  in doubt, I would  decide  an application  on the balance  of convenience.  This is  in line with the  holding by the Court of  Appeal in NBK Ltd & 2 Others  V Samcon Ltd [2003] KLR  462 where the Court  of Appeal adopted with approval the conditions  for granting an interlocutory injunction  as stated  in Giella V Cassman Brown  and at page  464 went on  to state as follows:-

“With respect, these are arguable points. First, he attempted to have   other circumstances apart from the conditions set out   above to be considered.  Such a course was roundly rejected by the Court of Appeal in Abel Salim & Others V Okongo & Others [1976] KLR 42 at page 48 where it was held inter alia:

“In granting or refusing to grant an interlocutory injunction, a court exercises its discretion.  I am  of the view that the  conditions  for the  grant of  an interlocutory  injunction are now  well settled   in East Africa, and I can see no reason  to depart  from them.  These are stated in Giella V Cassman Brown & Company Ltd [1973] EA 358 at 360:

Secondly, the court will decide an application on a balance of convenience only if it is in doubt.  The finding by the Learned Judge that the respondent had no prima facie case was clear and express.”

The Court of Appeal in the case of East African Development Bank V Hyundai Motors K Ltd [2006] e KLR CA 194/2004 further held:

“ We  are satisfied that the  Learned Judge  made very clear  findings  as regards the conditions  for granting an interlocutory injunction  which were to the effect that   the respondent  had failed to meet these  conditions  then there  was no other avenues  open to the  Learned Judge to grant interlocutory injunction.  An attempt to consider other circumstances apart from the laid down conditions was rejected in Abel Salim & Others V Okongo & Others (supra).”

From the foregoing, therefore I find that the plaintiff’s application must fail and I proceed to dismiss it with costs to the 1st defendant.

Dated, signed and delivered in open court at Nairobi this 27th day of January 2016.

R.E. ABURILI

JUDGE

27/1/2016