[2021] KEHC 8857 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA

AT KISUMU

CIVIL APPEAL NO. 121 OF 2019

HENRY CHAMA CHAMA................................................................................APPELLANT

VERSUS

SAMMY TRADERS LIMITED.....................................................................RESPONDENT

[Being an appeal from the Judgment of the Hon. L. Akoth Resident Magistrate at Kisumu

Law Courts dated 7th October 2019 in the Kisumu CMCC NO. 409 OF 2015]

JUDGMENT

By an Amended Plaint dated 14th July 2016, the Plaintiff, HENRY CHAMA CHAMA, sued the Defendant, SAMMY TRADERS LIMITED, for the following reliefs;

“(a) Specific Performance or refund of depositedsum;Refund of Kshs 1,970,000/=.

(b) General and Exemplary Damages.

(c) The costs of the suit.

(d) Interest on (b) and (c) above.

(e) Any other remedy the Honourable courtdeem fit and just to grant.”

1. The claim arose from a Contract dated 7th October 2014.

2. Pursuant to the contract in issue, the Plaintiff purchased a TOYOTA PRADO, Registration Number KBZ 603B, from the Defendant.

3. The agreed Purchase Price was Kshs 3,600,000/=.

4. It is common ground that the Plaintiff paid a deposit of Kshs 1,200,000/=. The said deposit was made up of

Kshs 200,000/= cash, and Kshs 1,000,000/= being the value of the Plaintiff’s vehicle Registration Number KAR 119W, which the Plaintiff traded-in with the Defendant.

5. It is further common ground that the Plaintiff was supposed to pay the balance of the Purchase Price, through monthly payments of Kshs 200,000/=.

6. It was the Plaintiff’s case that in November 2014 he encountered difficulties, which made it difficult for him to remit the agreed monthly instalments. In those circumstances, the Plaintiff asserts that he negotiated with the Defendant, and that the said Defendant agreed to reduce the monthly instalments to Kshs 50,000/=.

7. However, the Defendant categorically denied the assertion concerning the alleged agreement to reduce the quantum of the monthly instalments.

8. The Defendant repossessed the Prado and sold it. The Plaintiff asserted that the repossession was carried out without any Notice to him; and also that the sale of that vehicle was done without due regard to his rights.

9. In answer to the claim, the Defendant asserted that if there was any breach of the contract between the parties, the person who was in breach is the Plaintiff.

10. When the case came up for trial, each of the parties had one witness.

11. Being the first appellate court, I have a duty to evaluate all the evidence on record.

12. PW1, HENRY CHAMA, is the Plaintiff. He testified having purchased a Prado vehicle from the Defendant. The Sale Agreement is dated 7th October 2014.

13. Whilst the Purchase Price was Kshs 3,600,000/=, PW1testified that he paid the deposit of Kshs 1,200,000/=, which left a balance of Kshs 2,200,000/=.

14. PW1said that in the month of November 2014, he encountered difficulties, and was unable to remit the agreed monthly instalments of Kshs 200,000/=.

15. He testified that he re-negotiated with the Defendant, so that he could pay instalments of Kshs 50,000/= monthly.

16. By 2nd February 2015, PW1says that he had paidKshs 165,000/=. However, the Defendant then demanded Kshs 635,000/=, which would bring the instalments to Kshs 800,000/=.

17. When PW1was unable to meet the Defendant’s said demand, the Defendant had the Prado repossessed and sold-off.

18. After the Prado was sold-off, the Defendant handed over to the Plaintiff, the sum of Kshs 300,000/=.

19. The Plaintiff asked the trial court to compel the Defendant to refund him the sum of Kshs 1,670,000/=, excluding the sum of Kshs 300,000/= which he had already received.

20. During cross-examination, PW1said that he did not have any evidence to show that the Defendant had agreed to reduce the monthly instalments from Kshs 200,000/= to Kshs 50,000/=.

21. DW1, ANDREW KIPKULEI, was a Manager at SAMMY TRADERS.

22. He corroborated the testimony of PW1concerning the Purchase Price for the Prado, as well as the deposit of

Kshs 1,200,000/=.

23. DW1explained that the balance of Kshs 2,400,000/= was payable by the Defendant over a period of 12 Months, hence the monthly instalments of Kshs 200,000/=.

24. DW1said that it is only after the Plaintiff had defaulted that the Defendant instructed an auctioneer to repossess the Prado.

25. The Prado was then auctioned for Kshs 2,100,000/=, and the Agreement for that sale was produced as an exhibit in court.

26. According to DW1, the Plaintiff remitted payments amounting to Kshs 300,000/= after the Prado had been auctioned. It is that amount which the Defendant remitted back to the Plaintiff.

27. Both witnesses referred to the agreement between the parties herein as being a Hire Purchase Agreement.

28. However, the said Agreement was not registered pursuant to Section 5of the Hire Purchase Act.

29. The learned trial magistrate held as follows;

“20. Having analyzed the provisions ofthe Hire Purchase Act, against theconduct of the plaintiff, it would be

unjust that the plaintiff claims thatthe agreement is not enforceable onthe basis that the terms therein arehire purchase in nature andtherefore ought to have beenregistered.”

30. The trial court noted that the Plaintiff had, by his conduct, attempted to meet his part of the bargain. Having made that observation, the trial court said;

“In the circumstances, it will beunjust and unequitable to raisean objection by the plaintiff, thatthe contract is enforceable basedsolely on the fact that it was notregistered under Section 5 of the

Hire Purchase Act.”

31. Finally, the trial court held that the contract was enforceable between the parties, thus rendering legal and justified the action taken by the Defendant.

32. Pursuant to Section 3 (1)of the Hire Purchase Act;

“This Act applies to and in respectof all hire-purchase agreementsentered into after the commencementof this Act under which the hire-purchase price does not exceed thesum of four million shillings otherthan a hire purchase agreement inwhich the hirer is a body corporatewherever incorporated; but thatmonetary limitation does not applyso as to affect the definition of‘hire-purchase business’in Section

2 (1).”

33. As the Purchase Price in this instance wasKshs 3,600,000/=, the agreement ought to have been registered.

34. It is the Appellant’s submission that the consequence of non-registration of the agreement between the Appellant and the Respondent would be that it is illegal and therefore unenforceable.

35. The Appellant cited the decision in IMPERIAL BANK OF KENYA V KARIUKI CONSTRUCTION COMPANY LIMIED & 2 OTHERS HCCC NO. 51 OF 2012, in which Havelock J. held as follows;

“In my view, the said Agreementhaving not been so registered asrequired by the Hire Purchase Act,the same cannot be enforced againstthe first Defendant. Furthermore, asper Section 5 (4) (a) supra, thePlaintiff had no right to repossessthe said motor vehicle registration No.KAZ 917L and sell the same.”

36. Section 5 (4)of the Hire Purchase Actprovides as follows;

“Unless a hire-purchase agreement hasbeen registered under subsection (2) –(a) no person shall be entitled toenforce the agreement againstthe hirer or to enforce thecontract of guarantee relatingto the agreement, and the ownershall not be entitled to enforceany right to recover the goodsfrom the hirer; and

(b) no security given to the hirer inrespect of money payable underthe agreement, or given by aguarantor in respect of moneypayable under a contract ofguarantee relating to theagreement, shall be enforceableagainst the hirer or the guarantorby any holder thereof.”

37. In the case of IMPERIAL BANK OF KENYA Vs KARIUKI CONSTRUCTION COMPANY LIMTED (above-cited), the court held that the hire-purchase agreement was not enforceable against the 1st Defendant, who was the hirer.

38. The court dismissed the Plaintiff’s claim against the 1st Defendant;

“under the terms of the Hire PurchaseAgreement ………”

39. However, the court went ahead to order as follows:

“c. The Plaintiff’s claim as againstthe first Defendant, as regardsits overdrawn account is allowedand judgement is entered in thePlaintiff’s favour in the mount ofKshs 1,393,768. 03 together withinterest thereon at the rate of18% per annum from 1st March 2011until payment in full.”

40. In the light of the said findings, it is clear that the contract between the Hirer and the Owner was not illegal. The non-registration of the hire-purchase agreement did not render the agreement illegal: it only rendered it unenforceable in the specific terms as stipulated in Section 5 (4)of the Hire Purchase Act.

41. That would explain why, in that case, the Plaintiff’s claim against the 2nd and 3rd Defendants was dismissed; and the reason is that those 2 Defendants were guarantors.

42. In the case of TAAWAWA SUPERMARKET LIMITED Vs FINA BANK LIMITED, CIVIL APPEAL NO. 118 OF 2002 the Court of Appeal said the following, concerning a hire-purchase agreement that had not been registered;

“We may add that failure to registerdid not render the agreement void orthe result that the company would berefunded all the money it paid underthe agreement. It retained its validityas a contract inter se and wasenforceable as such.”

43. The Court of Appeal went on to carefully examine the evidence on record and then made the following observation;

“There was provision in clause 7 ofthe agreement, for repossession ofthe vehicle in the event of breach,and the bank properly invoked thatclause.”

44. In the case before me, I find that pursuant to Clause 5of the Agreement, the Respondent had a right to repossess the vehicle, when the Plaintiff fell into arrears. Therefore, as the contract between the Appellant and the Respondent was valid and thus enforceable inter se, the Respondent’s action of repossessing the vehicle was lawful.

45. I find that the trial court made the correct decision to dismiss the Plaintiff’s case, in the circumstances.

46. Before concluding the judgment, I wish to adopt the following words of the Court of Appeal in DAVID SIRONGA OLE TUKAI Vs FRANCIS ARAP MUGE & 2 OTHERS, CIVIL APPEAL NO. 76 OF 2014;

“But perhaps the move compellingargument against the approach taken bythe learned Judge lies in the provisionsof our Judicature Act, Cap. 8 of Laws ofKenya, regarding the application ofstatutes and the doctrines of equity.

Section 3 (1) thereof embodies what hasbeen called the hierarchy of norms, andprovides for how the jurisdiction of the

courts in Kenya shall be exercised. Thesection creates a deliberate andhierarchical sequence of laws, startingwith the Constitution, followed byStatutes and next the substance of thecommon law, the doctrines of equity andthe statutes of general application inforce in England on the 12th August 1897.

………….

section 3 (1) (c) makes it clear that thesubstance of common law and thedoctrines of equity apply only in so faras the statute does not apply. In otherwords, the Judicature Act does not allowa court of law to ignore an expressstatutory provision under the guise ofapplying the doctrines of equity.”

47. To the extent that the trial court appeared to base its judgment upon the consideration of what it deemed to be “unjust and unequitable”, the decision would have been unsustainable.

48. However, as already demonstrated above, the actions of the Respondent were lawful, and therefore enforceable inter se.

49. In the result, the appeal lacks merit, and is therefore dismissed. The costs of the appeal are awarded to the Respondent.

DATED, SIGNED and DELIVERED at KISUMU

This 9th day of February 2021

FRED A. OCHIENG

JUDGE