Simplex Industries Ltd v Kenya Commercial Bank Ltd [2013] KEHC 392 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT KISII

CIVIL CASE NO. 25 OF 2013

SIMPLEX INDUSTRIES LTD…………………..……………………… PLAINTIFF

VERSUS

KENYA COMMERCIAL BANK LTD …………….………………… DEFENDANT

RULING

1. The plaintiff filed a Notice of Motion under Order 40 Rule 1 (a) of the Civil Procedure Rules together with a plaint under certificate of urgency dated 15^th November 2013 seeking orders that:-

1. The Honourable court be pleased to issue an interlocutory prohibitory temporary injunction to restrain the first defendant from offering for sale and alienation the suit motor vehicle, to wit, a Caterpillar Roller/Crader/Crane registration No. KBC 188S, until this suit is heard and finalized.
2. The Honourable Court be pleased to make an order for the release to the plaintiff of the said vehicle pending the hearing and determination of this suit.
3. Pending the hearing of this application the Honourable Court be pleased to issue an interim order of injunction to stop the sale and service upon the defendant be dispensed within the first instance.
4. The cost of this application be costs in the cause.

2. The notice of motion was supported by an affidavit sworn by the Jonathan Sigu Omungu, managing director of the plaintiff company acknowledging that in October 2011 he approached the defendant for a loan of Kshs.15,000,000/= to enable plaintiff purchase a caterpillar motor vehicle with a roller/crader/crane as he had tenders for construction and grading of certain roads in Mumias County.  The defendant duly accepted to loan the plaintiff the money and subsequently the parties signed a vehicle and assets finance agreement on 21^st November 2011 and on 25^th January 2012 the said caterpillar motor vehicle registration NO. KBC 188S was bought and registered jointly in the names of plaintiff and defendant.
3. He further averred that he made payments to the defendant upto June 2013 when he lost the contracts with Mumias District and as a result he could not clear the loan but by that time he had paid about 12 installments totalling of Kshs.13,000,000/=.
4. That in October 2012, he got another contract with Ndhiwa CDF Board and after completing the job the latter were to pay him Kshs.2,500,000/= but due to transition to devolved government the Ndhiwa CDF Board has been unable to pay the same.
5. He further averred that he has held several discussions with the defendant together with Ndhiwa CDF Board with a view to convincing the defendant to be patient but by a letter dated 17^th September 2013 the defendant instructed an auctioneer to attach the said caterpillar grader.
6. That on the 9^th October 2013, the plaintiff signed a contract whereby the said grader was leased out to China Wuyi, C13 project at a rate of Kshs.540,000 for every 100 hours worked, which amount can be applied towards servicing the defendant’s loan.  However on the 14^th October 2013 M/s Purple Royal Investments attached the said caterpillar when it was working on the project being done by China Wuyi C13.  On 17^th October 2013, the plaintiff wrote to the defendants explaining the efforts he was making to repay the loan, but instead, the defendants advertised in the daily newspaper on 12^th November 2013 of their intention to sell by private treaty the said caterpillar grader KBC 188S.
7. The plaintiff concludes by saying that he is ready and willing to pay with immediate effect Kshs.200,000/= and if allowed to complete his project with the Chinese he would be able to pay the arrears since he would be earning approximately Kshs.500,000/= every two weeks.
8. Upon reading the above application, I certified it as urgent and granted Order 3 in accordance with the Notice of Motion.  The hearing inter partes was scheduled for Tuesday 3^rd December 2013.
9. The defendants on their part entered appearance through the firm of Mose, Mose and Milimo Advocates and filed a replying affidavit dated 6^th December 2013 sworn by Jonathan Sigu Omungu.  The defendant’s Manager acknowledged the fact that they advanced a loan facility to the plaintiff, which loan was supposed to repaid by monthly installments of Kshs.614,419.50 plus interest at a contract rate of 27% p.a. plus other applicable bank charges and penalties with effect from 1^st March 2012 upto 1^st February 2013.
10. That the plaintiff initially serviced the loan but fell into arrears particularly from April 2013 when he sought defendant’s indulgence to be accommodated by allowing the plaintiff more time to pay the arrears.  Consequently, despite several requests and proposals which were favourably granted by the defendant the plaintiff persisted in defaulting in its contractual obligations requiring him to repay the loan.
11. The deponent of the Replying Affidavit further refuted plaintiff’s averments that he had been honouring the loan repayments until April 2013 and averred that the plaintiff was in default before April 2013 and that the plaintiff owes the defendant a sum of Kshs.13,171,968.05 as at 2^nd December 2013 with arrears standing at an all time high of Kshs.5,978,198.48.  He has also deponed that the loan amount continues to attract interest at the contractual rates, bank charges and penalty.
12. In concluding his averments Mr. Omungu averred that the plaintiff’s repayment of the loan advanced to it by the defendant was not predicated on any condition precedent or at all; the plaintiff’s breach of contractual terms on repayments of the loan are not only unlawful but also un acceptable in light of the fact that the security asset is a depreciating asset and the plaintiff’s proposal are dependent on uncertain and indefinite conditions or factors that are not within his control but rather within the control of third parties who are not parties to the contract.
13. When the matter came before me on 10^th December 2013, Mr. Okoth for the plaintiff submitted that the plaintiff came to court seeking equitable reliefs while recognizing that the defendant has a right to repossess in keeping with section 3 (1) (d) of the Judicature Act that this court has power to exercise its equitable jurisdiction in the interests of justice.  He relied on the principles of Equitable Remedies by Spry 2^nd Edition at page 205 on readiness and willingness submitting further that the court has a right to exercise this equitable jurisdiction though the law allows defendants to observe rules of contract where debtor is willing to settle.
14. Mr. Mose for the defendant submitted that the instant application is completely devoid of merit and ought to be dismissed with costs to the defendant.  He highlighted the following points:-

• it is not in dispute that the plaintiff took a loan from the defendant and a contract exists in that regard;
• there is no dispute that the plaintiff/applicant has run into arrears amounting to Kshs.5,000,000/= as at 02/12/2013, while the total loan running is Kshs.13,171,968/=;
• the plaintiff/applicant has difficulties repaying the loan;
• the loan given was not pegged on any other future contracts as the plaintiff/applicant wants the court to believe;
• the applicant has not established a prima facie case with probability of success;
• the property in issue is a fast depreciating property so that if same is returned to plaintiff/applicant in the current circumstances, the defendant is bound to suffer loss since without repayment the money lent to the plaintiff/applicant will not be recoverable, thereby putting the defendants in difficulty in its day to day operations;
• the reliefs sought in the plaint are incapable of being granted by this court.

15. I have read the authorities cited by both counsel and carefully considered their respective brief submissions in court.  The only question that the court needs to determine is whether the applicant has established a prima facie case with a probability of success so as to make this court to grant him an injunction and stop the impending sale of his tool of trade a caterpillar tractor by the defendants.
16. The requirement for grant of interim orders of injunction were considered by a five (5) judge bench comprising Busighe P. Arach Amoko, DPJ, Mkawawa, Butaa and Kubo JJ at the East African Court of Justice in the matters of Mary Alwiza & Okoth Mondah –vs- Attorney General of Kenya and Secretary General of East Africa Community Application No.3 of 2010 EALS Law Digest 2008-2011 p1.  The judges relying on the authority in Sergeant V. Paul [1979] p6 EACA 63 stated:-

“One, the granting or refusal of a temporary injunction which is an interlocutory order, is an exercise of judicial discretion which must be exercised judiciously. 

Two the purpose of a temporary injunction is to preserve the status quo (see:  Noor Mohamed Hammohamed –vs- Kassumali Virji Madhani (1953) 20 EACA and Garden Cottage Food Limited –vs- Milk Marketing Board (1984) AC 130.”

Three, the conditions for the grant of an interlocutory injunction are now well settled in East Africa:-

1. An applicant must show a prima facie case with a probability of success;
2. 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 and
3. If the court is in doubt, it will decide an application on the balance of convenience.

17. The above principles were also enunciated in Giella –vs- Cassman Brown (1970) EA 308 EA Industries –vs- Trufoods [1972] EA 420, Prof. Peter Anyang Nyongo and 10 others –vs- The Attorney General of Kenya and 5 others.  Reference No.1 of 2006 (EACA) and East African Law Society and 4 others –vs- The Attorney General of the Republic of Kenya and 3 others – Application No. 9 of 2007 (EAC) arising out of Ref. NO.3 of 2007 (EAC).
18. From the pleadings and the respective submissions by counsel, it is an undisputed fact that the plaintiff did indeed enter into a vehicle and asset finance agreement with the defendant under which the plaintiff was loaned Kshs.15,000,000/= by the defendant for the purchase of a caterpillar grader.
19. It is also an undisputed fact that the plaintiff has fallen into arrears beginning this year for the repayment of the loan facility where he was supposed to remit Kshs.614,419.50 per month.
20. The plaintiff on his part tried to engage the defendant by a letter dated 29^th May 2013 in which he proposes to reschedule his loan repayment  down from 650,000/= to Kshs.300,000/=, a proposal which was declined by the defendant citing the fact that the caterpillar grader was a highly depreciable asset whose repayment period needed to be strictly adhered to.  Though the defendant gave the plaintiff up to 30^th June 2013 to collect his debts in order to clear his arrears, the plaintiff has failed to do so.
21. From the terms of the agreement signed between the plaintiff and defendant, clause 3 (d) on payment states:-

4. The customer acknowledges that punctual payment of the installments and the other sums payable to the bank under this agreement is of the essence of the agreement, and that if any installment or such sum is not paid on its due date, the customer shall be deemed to have repudiated this agreement and without prejudice to any other right or remedy which the bank may have under this agreement or otherwise.

1. The full remaining balance of the financed amount and contract interest in respect of each finance Addendum shall immediately become due and payable, and the customer shall on demand by the bank pay the same together with default interest thereon at the Default Interest Rate such interest to accrue on a day to day basis from the due date until the date of payment as well after as before judgment and

ii)  The bank shall be at liberty to resell the goods (which remains

     the property of the bank).

22. The reason the plaintiff has advanced for not being able to continue paying his loan with the defendants is purely based on failure/restrictions in carrying out his contracts with third parties.
23. As correctly pointed out in the defendant’s Replying Affidavit at paragraph 15 the plaintiff’s repayment of the loan advanced to it by the defendant was not predicated on any condition precedent and neither were the parties who have failed to pay the plaintiff for work done that is Mumias Sugar Company Limited and Ndhiwa CDF Project part and parcel of the parties to the contract signed between the plaintiff and the defendant.
24. Secondly, from the plaintiff’s statement of account annexed to the Replying Affidavit, it is clear that starting from the period he got the loan which was March 2012 to August 2013, there is no one time that the plaintiff has been able to pay the full Kshs.650,000/= into his loan account meaning that the plaintiff did not then, and does not now have the capacity to repay the loan,
25. Thirdly, the plaintiff has only attached his bank statement with the defendant but has not attached his financial statement for his business in order to establish to this court how much money is getting in and out of his account or better still his income vis-à-vis his expenses in order to make out whether or not he is actually able to repay the defendant’s loan monies.
26. Fourthly, the authorities cited by the plaintiff do not help his case as the same deal with the issue of whether or not a statutory notice of sale was delivered to the appellant in that case.  The plaintiff’s case is not challenging whether or not he received statutory notice of sale.  What the plaintiff is trying to get from this court is, according to the plaint the following:-

1. A declaration that since the loan contract is still operative until 1^st February 2013 the plaintiff be allowed to repay the loan by installments of Kshs.250,000/= per month until arrears is cleared and in case of business improvement the plaintiff will increase the amount of installment payable.
2. The Ndhiwa Constituency Development Fund Board be ordered to indemnify the plaintiff by paying to the defendant the sums of Kshs.2,500,000 together with interest thereon at 2770 p.a from 1^st November 2012 to the date of full payment.
3. An order for the release of the Caterpillar Grader/Crane Registration NO. KBC 188S to the plaintiff to use for the purpose of raising funds to repay the loan.
4. An order of injunction to restrain the defendant from selling the said Caterpillar Grader and to return possession of the same until the period of the contract for repayment of the loan expires.
5. Costs of the suit.
6. Such further or other alternative relief as this Honourable Court deems fit to grant.

27. Clearly this court cannot grant prayer (a) in the plaint as this would mean rewriting the contract for the parties.  In Raydip Housing Development Ltd –vs- Wachira Wambugu – Civil Appeal NO.4 of 1991 as well as National Bank of Kenya Ltd –vs- Pipepastic Samk Dit (K) Ltd – Civil Appeal NO.95 of 1999 the courts ruled that a court of law cannot rewrite a contract between parties.
28. Secondly, the plaintiff has not sued Ndhiwa Constituency Development Fund to repay the moneys owed to it nor has it joined it in these proceedings so as to make it compellable to pay Kshs.2.5 million owed to the plaintiff.  If this court were to grant prayer (b) of the plaint it would be in contravention of the rules of natural justice which requires that no party should be condemned unheard (audi al teram partem).
29. Therefore, in my view the plaintiff has not established a prima facie case that deserves it to be given an injunction.
30. It is also my considered view that any loss that may suffered by the plaintiff cannot be said to be such as would not be compensated in damages.  I am persuaded that the defendant has the capacity to pay such damages if the plaintiff suffers loss after the sale of the machine.  It is also my view that if the orders sought herein are granted, the defendant is likely to suffer loss as there is no certainty that the plaintiff will be able to repay the loan even if time is extended for the repayment.
31. Finally, this application cannot succeed for the reason that the prayers in the application are at variance with the main prayers sought in the plaint.  The application is accordingly dismissed with costs to the defendant.

Dated and delivered at Kisii this 19^th day of December, 2013

R.N. SITATI

JUDGE.

In the presence of:

Mr. Minda for G.S. Okoth for Plaintiff

Mr. H.N. Otara for Mose for Defendant

Mr. Bibu - Court Clerk