[2022] KEHC 13962 (KLR)

Mutahi v Co-operative Bank of Kenya & another (Civil Case 358 of 2012) [2022] KEHC 13962 (KLR) (Civ) (19 October 2022) (Judgment)

Neutral citation: [2022] KEHC 13962 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Case 358 of 2012

JK Sergon, J

October 19, 2022

Between

Anthony Maina Mutahi

Plaintiff

and

Co-operative Bank Of Kenya

1st Defendant

Credit Reference Bureau Africa Ltd

2nd Defendant

Judgment

1. The plaintiff herein filed a suit by way of an amended plaint dated July 16, 2012 and sought for judgment against the defendant in the following manner:a.General damages for embarrassmentb.General damages for malicious listingc.General damages for defamationd.Costs of the suit together with interest thereon at court rates.

2. The plaintiff pleaded in his plaint that on or about the year 2008, he applied for a loan with the 1st defendant which he faithfully serviced from drawdown until the same was fully liquidated in the year 2010.

3. The plaintiff further pleaded in his plaint that sometime in the year 2011, the plaintiff applied for a loan with the K-rep Bank to enable him expand his business but to his shock and disbelief, Krep bank declined to approve the loan stating that he had been listed as a loan defaulter and bad debtor with the Credit Reference Bureau, the 2nd defendant herein.

4. It was also pleaded in his plaint that the plaintiff thereafter visited the 2nd defendant’s office where he was informed that he had been listed by the 1st defendant as a defaulter and that he had defrauded the 1st defendant the sum of Kshs 1,234. 56/=.

5. It was further pleaded that the plaintiff then followed the same with the 1st defendant who informed him that he had been wrongly listed and the 1st defendant issued a letter to the plaintiff acknowledging the mistake on their part.

6. The plaintiff avers that 1st defendant thereafter pledged to have the plaintiff’s name expunged from the list of defaulters at the 2nd defendant however despite numerous communication and efforts by the plaintiff to have the 1st defendant remove his name from the 2nd defendant’s records as a defaulter and a fraudster, the 1st defendant has refused to comply with the same to date.

7. The plaintiff further avers that defendants caused to be published the following words which were defamatory of the plaintiff:“PERSONAL PROFILECRN 00012843846Names: MR ANTHONY MAINA MUTAHIFRAUDULENT CASES-Listing institution: Co-operative Bank of Kenya LimitedIncident Date: 24th March 2010 Fraud status: PROVENFraud amount: Kshs 1,234. 56/= Loss Amount: Kshs 1, 234. 56Incident Details: BANK BAD DEBTOR”

8. It was pleaded that the listing by the 1st defendant as a loan defaulter was malicious and as a result the plaintiff was embarrassed after being denied a business loan, it made it impossible to obtain financing and or/loan from any financial institution thereby subjecting him to financial distress and his reputation and credit worthiness was cast in bad light as particularized in paragraph 17 of the plaint.

9. The 1st and 2nd defendants entered appearance upon service of summons and filed their statement of defence on 30th August, and August 24, 2012 respectively to deny the plaintiff’s claim.

10. The 1st defendant, in its statement of defence stated that indeed the plaintiff partly honoured the terms of their agreement and paid the required instalments until the month of March 1, 2010 when he ultimately stopped making repayments, as a result the 1st defendant vide letter dated 1st March 2010 notified the plaintiff of the default however even after the notification there was no response forthcoming from the plaintiff.

11. The 1st defendant further stated that sometime in the year 2011 the plaintiff fully serviced his loan and it issued him with a clearance letter confirming he was no longer indebted to the bank and could access banking facilities with other institution therefore the allegations of malice are denied, this was in compliance with Section 28(4) of theBanking (Credit Reference Bureau) Regulations 2008 which requires the bank to update the 2nd defendant on any customer information.

12. The 1st defendant avers that if any defamation, malice or embarrassment occurred as alleged or at all, the same was wholly occasioned by the plaintiff by not fulfilling his loan agreement obligations and that the notification to the 2nd defendant and conducts of its employees in handling non-performing loans is done in the ordinary course of its business, in utmost good faith and in compliance with the Banking CRB Regulations 2008.

13. The 2nd defendant, in its statement of defence stated that if at all any information was provided to it by the 1st defendant in relation to the plaintiff and if at all such information was inaccurate and if at all the plaintiff has suffered any loss or damages therefrom, which are all denied, then the 1st defendant is solely liable to the plaintiff and the 2nd defendant is entitled to indemnity from the 1st defendant.

14. At the hearing, the plaintiff testified while the 1st defendant called one witness who gave evidence for the defence case.

15. The plaintiff who was PW1 adopted his signed witness statement dated May 15, 2018 as his evidence in chief and also filed a list of documents and produced them as PEXH 1-15.

16. The plaintiff testified that he suffered damage and embarrassment even though he had faithfully serviced his loan but was still blacklisted by the Credit Reference Bureau.

17. In cross-examination by Miss Muthee, the plaintiff stated that he was agreeable to the terms of the letter of offer which gave the bank the right to refer the information to Credit Bureau Reference.

18. The plaintiff stated he does not have any letter from K-rep Bank declining his loan and that he had been listed by three other banks other than the 1st defendant and he could not tell whether he was denied loans because of the said listings.

19. In cross-examination by Mr Kisinga, the plaintiff stated that he did not file a formal form of complaint about CRB and referred a letter in response to an email seeking to have the matter referred to an Alternative Dispute Resolution but in response his advocate directed they file the suit instead.

20. It is the testimony of the plaintiff that he was embarrassed as a result of the listing by KCB, Barclays Bank, Co-operative and CFC Stanbic Bank and that his friends, business partners and members of the public could not access those reports.

21. The plaintiff stated that he has not produced any certificate of business registered or any evidence to show that his business collapsed and that he was not given a letter showing he was denied a loan due to negative listing as well as the fact that he did not bring letters of clearance from the concerned banks.

22. In re-examination, the plaintiff stated that the bank acknowledged that he had no outstanding loan and the statements from other banks are not related to this case.

23. Rose Kirui who was DW1 began his evidence by stating that she is the Business Banker of the 1st defendant and adopted her signed witness statement dated October 30, 2012 as evidence before this court and produced her bundle of documents as D Exh 1-6.

24. On cross-examination by Mr Kisinga, DW1 testified that the bank issued a pre listing notice informing the customer of the same but the plaintiff never responded to the letter.

25. I have re-evaluated the arguments presented before this court. I have also considered the rival written submissions. The issues for determination put forward by both parties revolve around the following issues:a.Whether the listing of the listing of the plaintiff at the CRB defamatory?b.Whether the 1st defendant was entitled to refer the Plaintiff’s name to the Credit Reference Bureau as a loan defaulter.c.Whether the plaintiff is entitled to the prayers sought.

26. On the first issue the plaintiff submitted that the 1st defendant owed a duty of care not to carelessly forward the plaintiff’s name to the 2nd defendant when the plaintiff was not indebted to the 1st defendant in any case, there was simply no evidence before Court that the plaintiff was indebted as alleged.

27. The plaintiff further submits that the listing was and is illegal, unlawful and malicious, as the plaintiff was never served with any adverse notice from the 1st defendant as required under the provisions of Regulation 28 of Legal notice No 97, the Banking (Credit Reference Bureau) Regulations 2008 of Banking Act Cap 488.

28. The plaintiff contends that his business went down, his customers shunned him, all public institutions declined to give him a loan from 2010 to date having seen him as a fraudster.

29. The plaintiff relied on the caseMiguna Miguna v Standard Group Limited & 4 Others (2017) eKLR where the Court of Appeal stated thus:“The law of defamation, or, more accurately, the law of libel and slander, is concerned with the protection of reputation: "As a general rule, English law gives effect to the ninth commandment that a man shall not speak evil falsely of his neighbour. It supplies a temporal sanction ..." Defamation protects a person's reputation that is the estimation in which he is held by others; it does not protect a person's opinion of himself nor his character. 'The law recognizes in every man a right to have the estimation in which he stands in the opinion of others unaffected by false statements to his discredit' and it affords redress against those who speak such defamatory falsehoods....”

30. On the other hand, the defendant submitted that the plaintiff’s listing was not in any way defamatory since it has been established that it is indeed true that the plaintiff had defaulted in loan repayment and that according to the Consumer Credit Report dated October 17, 2011 provided by both the 1st defendant and the plaintiff himself he has been listed by other banking institutions as a delinquent.

31. The defendant has relied on the caseMcPherson v Daniels (1829) 10 B & C 263 ,272 Little dale J stated :“the law will not permit a man to recover damages in respect of an injury to a character which he does not or ought not to possess.”

32. The defendant contends that the plaintiff does not possess a character worth defaming since he has had several uncontroverted listings of which he does not deny that he has hence no action can therefore lie as against the 1st defendant by virtue of the fact that it has established that the plaintiff did indeed default hence negative listing.

33. In addressing the foremost issue, I turn my attention to the case of Samuel Ndungu Mukunya v Nation Media Group Limited & Another[2015] eKLR wherein the court aptly laid out the ingredients to be proved in a defamatory claim as follows:a.The libel must be published by the defendant.b.The published words must refer to the claimant.c.The statement as published must be false and defamatory of the plaintiff.d.The publication was malicious.“A statement is defamatory of the person of whom it is published if it tends to lower him/her in the estimation of right thinking members of society generally or if it exposes him/her to public hatred, contempt or ridicule or if it causes him to be shunned or avoided.”“Defamation is a tort and is defined as a publication of a statement which tends to lower a person in the estimation of right thinking members of the society generally or which tend to make him be shunned or avoided. The defamatory statement is one which has a tendency to injure the reputation of the person to whom it refers---The words must be maliciously published and malice can be inferred from a deliberate or reckless or even negligently ignoring of facts.”

34. The above paragraph is cited in Phineahs Nyagah v Gitobu Imanyara(2013) e KLR by Odunga J and captures the ingredients of defamation.

35. In diverging confidential information of a customer, a bank may not be in itself defamatory, courtesy of the Credit Reference Bureau Regulations 2013, under the Banking Act. Section 26 states that:(i)A Bureau shall protect the confidentiality of a customer information received in terms of these regulations and shall only report or release such customer information.1. to the customer concerned2. to the Central Bank3. to a requesting subscriber4. to a third party as authorised by the customer concerned, or5. As required by law.

36. Regulation 19(1) further states that:“a suit cannot lie against the Central Bank, Bureau, an institution of chairpersons --- or any other person authorised under these Regulations --- for loss or damage caused or which is likely to be caused by anything, which is done or intended to be done in good faith in pursuance of these regulations or guidelines issued hereunder.”

37. The above provisions, in my considered view are applicable if the thing complained of was done in good faith. Where the institution is found to have been reckless and negligent and in breach of the institutions duty of care to the customer, then, a suit for negligence and sequential damage will lie.

38. The onus lies on the plaintiff to prove that the bank or institution did not act honestly and was actuated by malice.

39. I do not think that the published listing of the plaintiff to authorized institutions as stated in the Regulations cited above was defamatory to his character. No unauthorized persons got that information. The publication is authorized under Statute, the Banking Act. It can therefore not be defamatory unless the plaintiff publicized the same to unauthorized persons including “right thinking members of the society” and no proof was tendered.- See Phineahs case Supra, as well as Standard Chartered Bank of Kenya Ltd -vs- Intercom Services Ltd & 4 Others where it was held that the duty of confidentiality is not absolute as it may be broken when it for instance, by a court order, a party is directed to disclose certain information to various bodies or organization.

40. On the second issue, the 1st defendant does not deny the fact that it referred the plaintiff’s name to the CRB as a loan defaulter in compliance with Regulation 14 and 28 (4) of the Banking (Credit Reference Bureau) Regulations 2008. The plaintiff submits that this action on the part of the 1st defendant was both malicious and uncalled for given that the amount due was only Kshs 1,234. 56/= and the bank had not called upon the plaintiff to make good this sum.

41. On its part the 1st defendant submits that the plaintiff defaulted in repayment of the loan and on March 1, 2010, the defendant notified the plaintiff of the default and consequences leading to a listing with the 2nd defendant. The 1st defendant in performance of its statutory duty forwarded the plaintiff’s credit records and information to the 2nd defendant since it was a non performing loan.

42. The 1st defendant further submitted that sometime in 2011 the plaintiff serviced his loan account and thereafter in October 2011 the 1st defendant issued the plaintiff with a clearance letter confirming the plaintiff was no longer indebted to 1st defendant bank.

43. I find that the 1st defendant was perfectly entitled to refer the plaintiff’s name to the 2nd defendant.

44. Further there is no evidence that the plaintiff availed himself of the Statutory remedy provided by Regulation 35(5) of the Banking (Credit Reference Bureau) Regulations 2013which sets out the procedure to be followed by a customer who is aggrieved by his reference to theCRB Regulation35(5) provides:-“Where the customer believes that the information contained in the database is inaccurate, erroneous or out-dated, the customer may notify the Bureau in writing of the information disputed.”

45. The plaintiff’s failure to make use of this mandatory procedure in the event he was aggrieved by the Reference to the CRB means that the suit is premature. The plaintiff ought to have pursued this statutory remedy before filing suit against the Bank. This is in line with the Doctrine of “exhaustion of remedies” which provides that a party ought to first pursue (exhaust) other statutory remedies before approaching the Courts. In Geoffrey Muthinja Kabiru & 2 Others v Samuel Munga Henry & 1756 Others [2015]eKLR this doctrine was pronounced as follows:-“It is imperative that where a dispute resolution mechanism exists outside courts, the same be exhausted before the jurisdiction of the courts is invoked. Courts ought to be the fora of last resort and not the first port of call the moment a storm brews within churches, as is bound to happen. The exhaustion doctrine is a sound one and serves the purpose of ensuring that there is a postponement of judicial consideration of matters to ensure that a party is first of all diligent in the protection of his own interest within the mechanisms in place for resolution outside of courts… This accords with Article 159 of the Constitutionwhich commands Courts to encourage alternative means of dispute resolution.”

46. Finally I find that although it may have been petty for the Bank to make the reference to the CRB in respect of a debt of only Kshs 1,234/= it was certainly not illegal and/or unprocedural for them to have done so. It is further my view that this is a matter that may well have been resolved amicably without expending the limited time and resources of the judicial system if the plaintiff had availed itself of Regulation 35(5). I find that the Defendant was fully entitled to refer the Plaintiff to the CRB.

47. In awarding damages, the court drew considerable support in the guideline in the case of Jonesvs. Polland(1997) EMLR 233-243 where a checklist of compensable factors in libel actions were enumerated as follows;(1)The objective features of the libel itself, such as its gravity, its province, the circulation of the medium in which it is published, and any repetition;(2)The subject effect of the plaintiff’s feelings not only from the prominence itself, but from the defendant’s conduct thereafter both up to and including the trial itself;(3)Matters tending to mitigate damages, such as the publication of an apology;(4)Matters tending to reduce damages;(5)Vindicating of the plaintiff’s reputation past and future.

48. Having come from that background and being guided by the case of Jared Omonde Kisera t/a Omonde Kisere & Co Advocatesvs. Ken Omondi, Wachira Waruru & the Standard LimitedHCCC No 160/2001 ( unreported), where Justice Wambilyanga awarded the plaintiff a sum of Kshs 800,000/- for defamation and that of Mong’are Gikonyo Gekong’a & Momanyi Advocatev. The standard Limited HCCC No 518/199 where a sum of Kshs 1,000,000/= was awarded, if the plaintiff herein had succeeded I would have awarded him a total of Kshs 1 million as general damages for defamation, malicious listing and embarrassment.

49. In the end, the plaintiff did not prove his case against the defendants on a balance of probability.

50. The same is hereby dismissed in its entirety with costs to the defendants.

DATED, SIGNED AND DELIVERED ONLINE VIA MICROSOFT TEAMS AT NAIROBI THIS 19TH DAY OF OCTOBER, 2022. J. K. SERGONJUDGEIn the presence of:……………………………. for the Plaintiff……………………………. for the 1st Defendant…………………………… for the 2nd Defendant