[2024] KEMSET 1348 (KLR)

Otieno v Mycredit Limited & another (Tribunal Case E004 of 2023) [2024] KEMSET 1348 (KLR) (12 September 2024) (Judgment)

Neutral citation: [2024] KEMSET 1348 (KLR)

Republic of Kenya

In the Micro and Small Enterprises Tribunal

Tribunal Case E004 of 2023

J.Bett, Chair, R.Katina, Vice Chair, J.Were, A Gikuya, A Kibet & JK Biwott, Members

September 12, 2024

Between

Lawrence Jagiro Otieno

Claimant

and

Mycredit Limited

1st Respondent

David Moruri Nyakwaro

2nd Respondent

Judgment

1. This claim was filed on the 15th November, 2023 by the Claimant against both Respondents and sought for orders to restrain the Respondents from repossessing, alienating, selling, offering for sale or in any way disposing off the Claimants motor vehicle registration number KBG 4750V Mitsubishi Canter. The application was accompanied by a Plaint (fast track), supporting affidavit and documents in support of the application and Claim.

2. The matter came up on 21st November, 2023 when the Tribunal issued orders that:a.The application and the annexures thereto, to be served upon the 1st and 2nd Respondents within seven (7) days of this Order.b.The Respondents to file and serve their Response on the Claimant within fourteen (14) days of service.c.The Applicant/Claimant to file his Reply to the Respondents response within seven (7) days of service of the Response by the Respondents.d.Mention on 21st of December 2023 virtually for the Tribunal to confirm compliance with the orders herein and issue further directions on the Application/Claim.e.In the meantime, the Respondents (themselves, their directors, officers, employees, servants or agents) are restrained from advertising, selling, disposing, alienating, transferring or dealing with motor vehicle registration number KBG 750V, Mitsubishi Canter FE63EE, Engine number 4D35 – D57XXXX until this matter is fully heard and determined.

3. The Respondents, through their Counsel filed a Replying Affidavit and Grounds of Opposition disputing the Tribunal’s jurisdiction to hear and determine the claim. The parties agreed to dispense the objection by way of written submissions. On 21st day of March, 2024, the Tribunal delivered a ruling striking out the objection and allowing the claim to proceed to hearing of the main suit.

4. The Plaintiff filed the Plaint together with the verifying affidavit dated 3rd November, 2024 and prayed for judgment against the defendants jointly and severally as follows:a.This Honourable Court be pleased to issue a permanent injunction restraining the Defendants whether by themselves, their directors, officers, employees, servants or agents, licensees, from advertising, selling, disposing, alienating, transferring and or in whatsoever manner dealing with the Motor Vehicle registration number KBG 750V, Mitsubishi Canter FE63EE, Engine Number 4D35-D57XXXX.b.An order compelling the 1st Defendant to restructure the entire loan account for the Plaintiffs with the aim of arriving at a just and acceptable instalment sum to be repaid by the Plaintiff.c.This Honourable Court be pleased to issue an order compelling the 2nd Defendant to release Motor Vehicle registration number KBG 750V, Mitsubishi Canter FE63EE, Engine Number 4D35-D57XXX belonging to the Plaintiff.d.Costs of the suit.e.Any other reliefs that the court may deem fit.

5. The Defendants filed their defence dated 19th February, 2024 denying the allegations in the Plaint and seeking the dismissal of the suit with costs to the defendants.

6. On 26th April, 2024, when the matter was mentioned for purposes of confirming compliance with Tribunals orders, the counsel for the Claimant sought leave to amend the Plaint in order to address the change of the circumstances. The Tribunal was informed that the subject motor vehicle had been sold and therefore, there was need a to amend the pleadings. The counsel for the defendants did not object to the application for leave to amend pleadings and asked for more time to file and serve further documents in light of the proposed amendments. The Tribunal allowed the application for leave to amend and directed the parties to file their respective documents accordingly.

7. The Claimant subsequently filed an amended Plaint dated 2nd May, 2024 together with the Amended Plaintiffs witness statement, and the amended Plaintiffs list of documents. The gist of the Plaintiffs Claim as set out in the amended pleadings is as follows:a.This Honourable Court be pleased to issue an Order declaring that any purported sale and transfer and registration of the subject motor vehicle by the 1st and 2nd Defendants/Respondents to an innocent 3rd party was unprocedural and unlawful.b.Special damages of Kenya Shillings One Million Ten Thousand (ksh. 1, 010,000. 00. ) being the value of the subject motor vehicle less the loan amount due of Kenya Shillings One Hundred Forty-Seven Thousand (Ksh.147,000) together with interests at the Court’s rate from 18. 10. 2023 when the subject motor vehicle was illegally attached until payment in full.c.Loss of income at Kenya Shillings Ninety Thousand (ksh 90,000. 00) per week together with interest at the Court’s rate from 18. 10. 2023 until payment in full.d.General damages for illegal attachment and sale of the Plaintiff’s motor vehicle.e.Costs of the suit.f.Any other reliefs that the court may deem fit.

8. On their part, the defendants filed their Amended defendant’s statement of defence dated 27th June, 2024. They prayed that the suit to be dismissed with costs. Having certified that the parties had complied with the directives of the Tribunal, the matter was then set for a hearing on 11th July, 2024.

Claimants Case Background 9. The Plaintiff averred that at all times material to this suit he was the registered owner of all that chattel known as motor vehicle registration number KBG 750V, Mitsubishi Canter FE63EE, Engine Number 4D35-D57XXXX. [hereinafter referred to as the “Subject Motor Vehicle”].

10. That on 26th April 2023, he applied for a loan facility which was approved by the 1st Defendant pursuant to loan facility letter dated 26th April 2023, Ref No. MCL/023100958401/2023 for a sum of Kenya Shillings Two Hundred Thousand (KShs.200,000. 00) and which loan was duly secured by the Plaintiff’s subject motor vehicle.

11. That on 14th September 2023, the Plaintiff made repayment to the 1st Defendant in excess of Kenya Shillings one Hundred Thousand (Ksh. 100,000. 00) leaving a loan balance in excess of Kenya Shillings One Hundred Forty-Seven Thousand (Ksh. 147,000. 00).

12. That the 1st Defendant issued the Plaintiff with a loan statement account for the period between 1st July 2023 to 28th October 2023 indicating a loan balance in excess of Kenya Shillings Two Hundred Eighty-Nine Thousand Seven Hundred (Ksh. 289,700. 00) based on inaccurate, illegal and unconscionable interests and charges in the description of tracking fees business regular, repo settlement fee for KBG 750V and towing fees.

13. That when he realized that he could not manage to settle the instalments for the months of October 2023 as per the agreement, he reached out to the 1st Defendant/Respondent through their Relationship Manager and requested for restructuring of the loan facility which was declined.

14. That the 1st Defendant appointed the 2nd Defendant as its agent to repossess the subject motor vehicle, the latter repossessed the Subject Motor Vehicle based on the alleged illegal and unconscionable interest and penalty charges.

15. That the Plaintiff stood to suffer irreparable financial loss, harm and great embarrassment as a result of the alleged Defendants illegal and unprocedural actions which loss could no be compensated and or restituted by an award of damages as the subject motor vehicle is the Plaintiff’s primary tool of trade.

16. That despite the several requests made to the 1st Defendant for proper reconciliation of accounts, the latter, in bad faith, failed to honour, abdicated and or neglected its responsibility.

17. The Plaintiff provided the particulars of the alleged oppression and unconscionability as follows:a.The interests and charges in the description of tracking fees business regular, repo settlement fee for KBG 750V, repossession fees, towing fees and penalty rates imposed by the 1st Defendant are way out of reach for a reasonable man;b.The interest, charges and penalty rates are calculated to ensure that the loan will never be repaid;c.The interest and penalty rates are contrary to public policy.d.The 2nd Defendant/Respondent repossessed the subject motor vehicle without following the procedures set under Order 22 of the Civil Procedure Rules and the Auctioneers Act No. 5 of 1996.

Claimant’s Evidence 18. At the hearing of this claim, the Claimant sought to rely on his statement filed alongside the pleadings. He was represented by the firm of M/S Kibere Ochieng Advocates. He testified that he is a businessman residing in Karachuonyo, Homabay County. That he filed the case because the 1st defendant deceitfully, illegally and forcefully took his motor vehicle and sold it.

19. That he applied for a loan of Ksh. 200k from the 1st defendant. He produced a loan application and facility letter dated 4th October, and 26th October, 2023 respectively marked EX 1 and 2 respectively. That the loan was secured using the motor vehicle Registration number KBG 750 V. He produced the log book marked EX 3. He also produced the motor vehicle registration records from the National Transport safety Authority marked EX 4. That he however did not receive the full amount as Ksh. 31,400/= was deducted as processing fee. He produced MPESA statement and copy of the fee schedule showing that he received Ksh. 169, 400/= marked as EX 5 and 6 respectively.

20. That he later got sick and he only managed to remit Ksh. 100,000/= on 14th September, 2023. He produced a copy of the Medical report and the MPESA schedule marked EX 7 and 8 respectively. That he called the 1st defendant’s credit manager and requested for restructuring of the loan in the month of October, 2023. The request was however declined.

21. That thereafter, he received a call from the 1st defendant that he would visit his home to check the motor vehicle tracker. That he called the 1st defendant and they confirmed that it was indeed true that the 2nd defendant had been sent to check the car tracker. That he was not present at home at that time as he was seeking medical treatment in Nairobi. That he informed the 1st defendant that he would be assisted by his wife who was present at his home.

22. That his wife called to inform him that the motor vehicle was being repossessed. He produced a repossession note marked as EX 9. That after the motor vehicle was repossessed, he sought audience from the 1st defendant in vain. He then filed this case for fear that the motor vehicle would be sold. That despite the Tribunal granting restraining orders, he later learnt that the motor vehicle had been sold.

23. That he was informed that the motor vehicle had been sold at Ksh. 500,000/= despite it being valued at Ksh. 1,010,000/=. He produced a copy of the valuation report dated 25th April, 2023, marked EX 10. He averred that he did not get a proclamation notice before repossession and neither did he get the redemption notice from the defendants.

24. He also stated that he established that the 2nd defendant was not a licenced auctioneer. He stated that he was willing to repay the outstanding balance hence the call for restructuring of the debt. He asked the Tribunal to intervene as he had been deprived of his livelihood.

25. The second witness to testify on oath was introduced as Ms Lilian Jobiase Ondiek, the spouse to the claimant. She sought to rely on the witness statement dated 11th April, 2024 produced and marked as EX 11.

26. That on 18th October, 2023, the 2nd defendant visited their home and informed her that he had been sent to repossess the motor vehicle. That she called the Claimant to establish whether it was true that the 2nd defendant had been sent to repossess the motor vehicle. That the Plaintiff told her that the 2nd defendant had informed him that the 1st defendant had sent him to check the motor vehicle tracker and not to repossess it. That after talking to the claimant, the 2nd defendant asked her to sign a paper or the claimant would be in trouble. Being afraid of the untold consequences, she then signed the document annexed in the Plaintiff’s bundle of documents as LJ 09.

Respondent’s Case 27. The defendants filed their statement of defence dated 19th February 2024 and subsequently filed the amended defendants’ statement of defence dated 27th June, 2024. In addition, they filed the list of documents dated 27th June, 2024 and witness statements dated 19th February, 2024. They were represented by the firm of M/S Moroga Wangwi & Associates Advocates.

28. In their amended statement of defence, the defendants stated that the Plaintiff was in arrears at the time of repossession, and after repossession, the Plaintiff did not make any effort to pay the outstanding balance. Apprehensive that the storage charges will increase, and in line with Paragraph 9 (c) of the loan facility Agreement, the 1st Defendant instructed Charlton Auctioneers to repossess and sell the motor vehicle in a public auction.

29. Further, the 1st defendant avers that the 1st Defendant is in the business of advancing loan facilities to its customers for the purpose of business working capital, which loan advances are secured through charging the assets given by the customer as collateral.

30. That via a Facility Letter dated 26/04/2023, the 1st Defendant offered, and the Plaintiff accepted a loan of 200,000/- on terms, inter alia, that:a.The Plaintiff shall deposit the logbook for Motor Vehicle reg. No. KBG 750V as a security/collateral (Motor Vehicle);b.The Motor Vehicle will be jointly registered in the name of the Plaintiff and 1st Defendant;c.The loan shall be repaid in 6 monthly instalments of Kshs.43,334 /- payable by the 28th of every month;d.The loan facility shall attract an interest of 4% per month on flat rate, and in the event of default, 3% interest will be charged on the arrears over and above the 4% monthly interest;e.Default in repayment would lead to recovery of the amount by selling the Motor Vehicle;

31. That the 1st Defendant perfected the security and disbursed the loan of Kshs.200,000/- on 28/04/2023. That subsequently, the Plaintiff defaulted on loan repayment and stopped remitting the instalments of Kshs. 43,334/- by the 28th of every month immediately after disbursement. Before repossession, the Plaintiff/Applicant only paid kshs. 100,000/- on 14/09/2023, which could not settle the instalments arrears, interest, and penalties.

32. That the Plaintiff persistently defaulted. As a result, as of 20/09/2023, the outstanding loan balance, arrears, interest, and penalties stood at Kshs. 168,427/-.

33. That despite several reminders to the Plaintiff regarding his contractual obligation to pay the monthly instalments, the Plaintiff continued to default, constraining the 1st Defendant to commence recovery proceedings in line with condition 9(c) of the Loan Facility Agreement. That the persistent default constrained the 1st Defendant to repossess the motor vehicle by instructing Citizen Auctioneers to repossess the motor vehicle. After repossession, the Plaintiff did not make any effort to pay the outstanding balance. Apprehensive that the storage charges will increase, and in line with paragraph 9(c) of the Loan Facility Agreement, the 1st Defendant instructed Charlton Auctioneers to sell the motor vehicle in a public auction.

34. That the Auctioneers duly complied with the Auctioneers Act and Rules by serving a Proclamation notice dated 20/09/2023 upon the 1st Defendant and notification of sale and subsequently repossessed the motor vehicle on 03/10/2023.

35. That despite the outstanding balance and the history of the Plaintiff’s default in loan repayment, since the said repossession, the Plaintiff never made any substantial attempt to repay the outstanding amount.

36. That despite having notice, the Plaintiff failed to exercise the right of redemption, resulting in a lawful sale of the motor vehicle to one Jane Njoki Njunge in a public auction on 22/11/2023 at Kshs. 500,000/- at around 10. 00 am, and on 24/11/2023, the 1st Defendant wrote to the Registrar of Motor Vehicles authorising a transfer of the said vehicle to the new purchaser.

37. Subsequently, on 28/11/2023, at around 3. 00 pm, the 1st Defendant received certified copies of the orders of the Honourable Tribunal stopping the said sale.

38. That as a result of the foregoing, the 1st Defendant was not capable of abiding by the orders of the Honorable Tribunal that were issued on 21/11/2023, bearing in mind that the time it was served upon the 1st Defendant, the sale had already taken place.

39. Further, that the parties are bound by their contract, and therefore, from the contract, the Plaintiff wilfully consented that in the event of default, the 1st Defendant should sell the motor vehicle to recover the outstanding loan amount.

40. That the Defendants are not able to comply with the prayers sought since the motor vehicle already passed to Ms. Jane Njoki, who is currently the legal owner. They prayed that the suit against it be dismissed with costs.

41. At the hearing on 11th July, 2024, the defendants through Mr. Dan Kiage, the 1st Defendant’s debt recovery manager sough to rely on his witness statement dated 27th May, 2024 and the list of documents submitted on 27th June, 2024. He testified that the turnover for the 1st defendant as per the audited report was 869,809,000/= . That the profit for the 1st defendant was Ksh. 146,165,000/=. That the 1st defendant’s company had 32 branches countrywide.

42. He confirmed that the 1st defendant issued all the documents to the Plaintiff. That the loan was a business capital facility of Ksh. 200,000/= payable in 6 months at a repayment of Ksh. 43,343/= pm at 4% interest pm and a penalty of 3% pm.

43. Additionally, the loan application attracted a processing fee of 3% of the principal loan. The facility was secured by a chattel motor vehicle to be jointly registered under the Plaintiff and the 1st defendant. He stated that the customer signed and the agents of the 1st defendant witnessed.

44. He stated that the Plaintiff did not make any attempts to pay until 14th September yet the loan had been advanced on 28th April. Upon non repayment which he described to constitute a breach, the 1st defendant issued notice on 20th September, 2023. The Citizen auctioneers were instructed to take possession of the motor vehicle. That the auctioneer issued a proclamation notice. He stated that the auctioneer is licenced with a class A licence certificate.

45. That once the Plaintiff failed to settle the arrears, they proceeded to give a notification for sale and advertised on the standard newspaper on 16th November, 2023. The motor vehicle was disposed off on 22nd November, 2023 at Ksh. 500,000/= to settle the loan. He stated that after the sale, they credited the Plaintiffs account. The cost was Ksh. 138,000/= including the advertisement fee, storage charges and the legal fees. The vehicle was stored at Moco Auctioneers awaiting the redemption by the Plaintiff. He gave the breakdown of all the charges amounting to Ksh. 138,000/=

46. On the condition and value of the motor vehicle, he testified that at the time of repossession, the motor vehicle had depreciated in value as it was not in a driveable state and that they had to use a breakdown to tow it. He sought to rely on all the listed documents including those that he had not highlighted.

Issues for Determination 47. After the conclusion of the hearing process, the Tribunal isolated the following broad issues for determination:a.Whether the Tribunal has jurisdiction;b.Whether the Parties entered into a valid contract and whether the contract was breached;c.Whether the repossession, sale, transfer and registration of the subject motor vehicle by the 1st and 2nd Defendants to an innocent third party was unprocedural and unlawful;d.Whether the Motor Vehicle was sold at market value and Whether the Plaintiff is entitled to special damages of Kenya Shillings One Million Ten Thousand (Kshs. 1,010,000) being the value of the subject motor vehicle less the loan amount due of Kenya Shillings One Hundred Forty-Seven Thousand (Kshs.147,000) together with interests at the Court’s rate from 18/10/2023 when the subject motor vehicle was attached until payment in full;e.Whether the Plaintiff is entitled to be paid for loss of income at Kenya Shillings Ninety Thousand (Kshs.90,000) per week together with interest at the Court’s rate from 18/10/2023 until payment in full;f.Whether the Plaintiff is entitled to be paid general damages for attachment and sale of the Plaintiff ’s motor vehicle; andg.Who bears the costs of the suit.

Analysis of the issues, evidence and the lawThe focus now shifts to the analysis of the issues, evidence, the law and determination.

I whether the tribunal has jurisdiction 48. This issue was raised as a preliminary issue. The defendants filed grounds of opposition. The parties agreed to dispense with the issue through written submissions. Both parties filed their written submissions. The Tribunal rendered its detailed ruling on 21st March, 2024 striking out the grounds of opposition and paving way for the determination of the main suit.

II Whether the parties entered into a valid contract and whether the contract was breached 49. That the parties entered into a contract by duly executing a loan facility letter dated 26/04/2023 has not been disputed. Evidence was adduced to show that the Plaintiff also signed the Fee Schedule allowing the defendant to deduct loan processing fees as set out in the agreement, confirming that the Plaintiff would get Kshs. 169, 600/- which was duly disbursed. The defendants submitted that there was no forgery and the Plaintiff admitted to signing all the documents. The loan agreement shows that the Plaintiff signed every part of the agreement as required. He confirmed to have done so during cross examination.

50. The defendants submitted that despite disbursing the amount as per the contract, the Plaintiff immediately defaulted in repayment as he only made a first installment of Kshs. 100,000/- on 14/09/2023. That his attempts to vary the terms were not accepted by the 1st defendant. The defendants submitted that the Plaintiff was required according to the Loan Facility Letter to make a repayment of six monthly installments of Kshs. 43,334/-.

51. On the allegation that the Plaintiff did not sign and that he was not aware that the instalments were payable after six months, the defendants sought to rely on the case of Jamii Bora Bank Limited & another v James Owek Ochieng [2020] Eklr, where the Court cited with approval the position in National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd and Another (2002) EA 503 where the Court of Appeal stated:“A court of law cannot rewrite a contract between the parties. The parties are bound by the terms of their contract unless coercion, fraud or undue influence are pleaded and proved. There was not the remotest suggestion of coercion, fraud or undue influence in regard to the terms of the clause.” As was stated by Shah JA in the case of Fina Bank Ltd V Spares and Industries Ltd (2000) 1 EA 52. Further, “It is clear beyond peradventure that save for those special cases where equity might be prepared to relieve a party from a bad bargain, it is ordinarily no part of equity function to allow a party to escape from a bad bargain.”

52. The Tribunal finds that the parties entered into a valid contract dated 26th April, 2023. We also find that the Plaintiff did not pay the monthly instalments of Ksh. 43, 334/= until 14th September, 2023 when he made a payment of Ksh. 100,000/=. This was in breach of clause 8 of the Loan agreement.

Whether repossession and sale of the motor vehicle was lawful 53. The defendants submitted that the repossession and sale were lawful. Through their witness, Mr. David Kage, the defendants informed the Tribunal that upon default, the 1st Defendant indulged the Plaintiff, who persistently defaulted until 14/09/2023 when he made the first disbursement.

54. That on 20/09/2023, in compliance with Auctioneers Rules, the 1st Defendant instructed duly licensed auctioneers, Citizen Auctioneers, to repossess the motor vehicle. That the Auctioneers prepared and served a Proclamation Notice dated 20/09/2023 before repossessing the motor vehicle.

55. He testified that the Plaintiff’s wife, who was present during repossession, did not sign the Proclamation Notice constraining the auctioneers to sign a certificate under Rule 12(1)(b) of the Auctioneers Rules at the last part of the Proclamation notice. The Plaintiff’s wife was served pursuant to Rule 12(1)(b), of the Auctioneers rules, which allows persons other than the owner of the property to receive service. That the service was carried out by Mr. David Moruri Naykwaro, the 2nd Defendant in his capacity as an employee/agent of Citizen Auctioneers, and section 23(a) of the Auctioneers Act allows auctioneers to use agents in the repossession process. Importantly, since the commencement of this case, the 1st Defendant indicated the auctioneers instructed in this transaction, and therefore, the Plaintiff ignored the fact that the 2nd Defendant was a mere employee/agent of Citizen Auctioneers.

56. That the Plaintiff did not make any payment, and his attempt for a top-up loan to offset the existing loan was declined by the 1st Defendant because the motor vehicle had been vandalized, and he was, therefore, unable to secure the loan and that no attempts of loan take-overs, among other options, were considered by the Plaintiff to settle the outstanding loan balance.

57. According to the witness, the 1st defendant was apprehensive that storage charges would increase, after about over 30 days, the 1st Defendant then instructed Charlton Auctioneers, a duly licensed auction firm, to sell the motor vehicle.

58. That in compliance with Auctioneers Rules, the said motor vehicle was advertised in the Standard Newspaper on 16/11/2023 and that there being no effort to redeem the motor vehicle, on 22/11/2023, the motor vehicle was sold to Jane Njoki Ndunge at a cost of Kshs. 500,000/-. They further submitted that as a show of good faith on the part of the 1st Defendant, since repossession on 03/10/2023 to sale of the motor vehicle on 22/11/2023, there was constructive notice upon the Plaintiff and a grace period of 50 days was provided. During the 50 days grace period, the Plaintiff neither moved the Tribunal in good time nor settled the outstanding loan amount. The acts of the Plaintiff left the Defendant with no choice but to sell the motor vehicle to avoid accruing storage costs and prevent the motor vehicle from further depreciation.

59. On his part, the Plaintiff submitted that the provisions under the Auctioneer’s Act and Rules, and the Movable Property Security Rights supported by various legal precedents provide the threshold that need to be achieved in order to deem such a sale, transfer and registration as either lawful or unlawful. That Section 73 of the Movable Property and Security Rights provides for a Notice of disposition from the Secured Creditor as follows:1. A secured creditor shall send a notification of its intention to dispose of the collateral to—(a) the grantor and the debtor; and (b) any other secured creditor that registered a notice with respect to the collateral, at least five working days before the notification is sent to the grantor. (2) The notification shall be sent at least five working days before the sale or other disposition, lease or license takes place and shall—(a) identify the grantor and the secured creditor; (b) contain a description of the collateral; (c) provide a statement of the amount required to satisfy the secured obligation including interest and a reasonable estimate of the cost of enforcement; (d) identify the manner of the intended disposition; and (e) provide a statement of the date after which the collateral will be sold or otherwise disposed of, leased or licensed, or the time and place of a public disposition.

60. The Plaintiff submitted that he was never served with such notice by the 1st Defendant as the secured creditor. That consequently, the process of disposing the collateral was unprocedural from the onset.

61. Additionally, drew the Tribunal’s attention to Rule 12 of the Auctioneer’s Rules that provide for the requirement of a Proclamation Notice together with the requirement on advertising as follows:(1)Upon receipt of a court warrant or letter of instruction the auctioneer shall in case of movables other than goods of a perishable nature and livestock—(a)record the court warrant or letter of instruction in the register;(b)prepare a proclamation in Sale Form 2 of the Schedule indicating the value of specific items and the condition of each item, such inventory to be signed by the owner of the goods or an adult person residing or working at the premises where the goods are attached or repossessed, and where any person refuses to sign such inventory the auctioneer shall sign a certificate to that effect;(c)in writing, give to the owner of the goods seven days’ notice in Sale Form 3 of the Schedule within which the owner may redeem the goods by payment of the amount set forth in the court warrant or letter of instruction;(d)on expiry of the period of notice without payment and if the goods are not to be sold in situ, remove the goods to safe premises for auction;(e)ensure safe storage of the goods pending their auction;(f)arrange advertisement within seven days from the date of removal of the goods and arrange sale not earlier than seven days after the first newspaper advertisement and not later than fourteen days thereafter; (g) not remove any goods under the proclamation until the expiry of the grace period.

62. He submitted that this requirement was completely overlooked by the 2nd Defendant and as such rendering the whole process unlawful and unprocedural. Additionally, the Plaintiff submitted that the 2nd Defendant is not and has never been registered as an auctioneer and therefore does not have capacity to receive the instruction to act as such.

63. He relied on the case of Oakpark Apartments Mombasa Limited vs Kenya Revenue Authority [2018]eKLR , J. N Kinoti t/a Max Auctioneers vs Dr Christopher Luusa [2009]eKLR and Amaco Ltd vs Hezron Getuma Onsongo [2019]eKLR, where the court held that an execution process that violates the Auctioneers Rules was null and void.

64. He finally submitted that the fact that the Plaintiff owed the 1st Defendant money did absolve both the 1st Defendant and the 2nd Defendant from following known legal procedures of execution and as such, their actions rendered the said sale, transfer and registration unlawful and unprocedural.

65. In response, the defendants submitted that Section 73 of the Movable Property and Security Rights article, does not apply in this case by dint of Section 5 (1) and (2) of the Act which provides (1) Except for sections 5(2) 6, 8, 56, 57 and 80 to 87, the provisions of this Act may be derogated from or varied by agreement, provided that the agreement does not affect the rights or obligations of any person that is not a party to the agreement.

66. That Section 73 is a derogable provision, and the clause 9(c) of the Loan Facility Letter that allowed for the immediate realization of the security without notice upon default.

67. That Additionally, as a show of good faith on the part of the 1st Defendant, since repossession on 03/10/2023 to sale of the motor vehicle on 22/11/2023, there was constructive notice upon the Plaintiff and a grace period of 50 days was provided. During the 50 days grace period, the Plaintiff neither moved the Tribunal in good time nor settled the outstanding loan amount. That the acts of the Plaintiff left the Defendant with no choice but to sell the motor vehicle to avoid accruing storage costs and prevent the motor vehicle from further depreciation.

68. They further submitted that the auctioneer is an agent of the principal. Therefore, the principal (1st Defendant) can appoint a new auctioneer to the extent that no prejudice is occasioned on the part of the debtor. That since Charlton Auctioneers duly advertised the motor vehicle for sale in compliance with Auctioneers Rules, the Plaintiff was not prejudiced in any way.

69. Upon the review of the submission by the parties, the Tribunal finds in consideration of the circumstances of this case that the repossession, sale and transfer of the subject motor vehicle was done hurriedly without according the Plaintiff reasonable time to pay the outstanding loan amount. The Plaintiff had made a payment of Ksh. 100,000/= on 14th September, 2023. About six days later, the defendants issued a notice on 20th September, 2023. Subsequently, the Plaintiff made an application for restructuring of the loan on 4th October, 2023 which was declined and the repossession was made on 18th October, 2023. It is noteworthy that the repossession took place before the lapse of the contractual period of 6 months.

70. The Tribunal also notes that the Plaintiff was never served with the notification of the defendant’s intention to dispose of the collateral as provided for in section 73 of the Movable Property and Security Rights Act. We find this requirement of a notice as an essential process before the disposition of the collateral. We do not agree with the defendants that the requirement of a critical process such as this could be derogated from. If the purported derogation was to be normalised, it would expose the borrowers to unscrupulous money lenders.

71. Further, despite the breach of the contract by the Plaintiff, the Tribunal is not convinced that the hurried repossession and the subsequent sale and transfer was justified given the circumstances and the station of the Plaintiff at that moment. The Plaintiff adduced evidence of his hospitalisation which according to him were duly communicated to the 1st defendant. We therefore find the repossession, sale and transfer unjustified given the prevailing circumstance. We therefore find that the decision to repossess, sale and transfer the motor vehicle was rushed, inconsiderate and hence unjustified given the prevailing circumstances of this case.

72. Further, the Tribunal notes that whereas the induplum rule is applicable to cap the interest rate charged, the other charges levied in this particular case are way too punitive as the amount payable accordingly would be in excess of Ksh. 389, 700/= just in a period of 6 months. Considering that the Plaintiff received Ksh. 169,400/=, we find that the additional charges were way punitive, unconscionable and contrary to public policy. The Defendants should have initiated measures to mitigate the escalation of the loss and not merely aggravating it. This practice is punitive, undermines the spirit of the induplum rule and therefore contrary to public policy. That this occurred when the Plaintiff had communicated to the 1st defendant that he was indisposed and having reached out for the restructuring of the loan and without adherence to the requirements of a notice of disposition of the collateral is a manifestation of malice on the part of the 1st defendant.

73. A closer look at the loan agreement shows that the Plaintiff described himself as a potato farmer. The defendant’s actions of repossessing the motor vehicle, a source of livelihood for the Plaintiff and without adherence to the requirement of notice is a clear demonstration of the defendants’ insensitivity to the general circumstance that the Plaintiff was faced with especially having struggled to pay Ksh. 100,000/= in the month of September, barely one month before the hurried repossession. We find this to be oppressive and contrary to public policy.

74. By seeking to restructure the loan, it is clear to us that the Plaintiff was willing to pay the outstanding amount. This unfortunately was met by the defendants hurried repossession, unnotified sale and transfer of the motor vehicle, the subject of the security guarantee of the loan facility.Whether the motor vehicle was sold at market value and whether the plaintiff is entitled to special damages of kenya Shillings One Million Ten Thousand (Kshs. 1,010,000) being the value of the subject motor vehicle less the loan amount due of Kenya Shillings One Hundred Forty-seven Thousand (KSHS.147,000) together with interests at the court’s rate from 18/10/2023 when the subject motor vehicle was attached until payment in full.

75. This issue is tied to the issue on Whether the Plaintiff is entitled to a refund of the value of the motor vehicle. The Plaintiff submitted that from the valuation report, the value of the motor vehicle was Ksh. One million and ten thousand (Ksh. 1,010,000/=). That the claim therefore is for the total value of the motor vehicle less the loan amount of Ksh. One hundred and fourty seven thousand shillings (147,000/=) together with interests at the court’s rate from 18/10/2023 when the subject motor vehicle was attached until payment in full. That this represents what the Plaintiff has actually lost as special damages and that effectively, the Plaintiff would be put in a place he was before the loss. He relied on the case of Bonhan Carter v Hyde Park Hotel Limited [1948] 64 TLR 177), where it was observed by Lord Goddard CJ as follows: “It is trite law that the Plaintiff must understand that if they bring actions for damages, it is for them to prove damage. It is not enough to note down the particulars and, so to speak, throw them at the head of the court saying ‘this is what I have lost’, I ask you to give me these damages; they have to prove it.”

76. He additionally relied on the case of Capital Fish Kenya Limited v The Kenya Power and Lighting Company Limited [2016] eKLR, the Court of Appeal stated that “….it is a legal requirement that apart from pleading special damages, they must also be strictly proved with as much particularity as circumstances permit.”

77. He finally submitted that the bundle of documents are sufficient proof of the claim for special damages and more particularly the document produced as exhbit no. LJO 2, showing the valuation of his motor vehicle by Autoscan Motor Assessors & Valuers Limited, which valued it at the claimed amount of Kenya Shillings One Million Ten Thousand (Kshs. 1,010,000).

78. On their part, the defendants submitted that the motor vehicle was sold at the market value, and that that Kshs. 500,000/- was the forced sale market value and competitive in the circumstances. On 25th April 2023, via a valuation presented to the Honourable Tribunal, the forced sale value was Kshs. 860,000/-. The motor vehicle was subsequently vandalized, and at the time of repossession and sale, the motor vehicle had to be towed. It did not have front wheels, among other mechanical defects listed on the Motor Vehicle Acceptance Note by MOCO Auctioneers That taking into account the passage of time and the extensive nature of the damages that were visible even from the photos, the Defendants submit that Kshs. 500,000/- was reasonable, fair, and competitive, and the 1st Defendant acted with utmost good faith and exercised due care in selling the motor vehicle.

79. That the difference between the forced sale value as at 25th April 2023 of Kshs. 860,000/- and the value on 22nd November 2023, six months later is Kshs. 360,000/-. The motor vehicle did not have front wheels and only had one rare wheel, which the Plaintiff admitted that they had been removed as part of the repairs. That a motor vehicle is a fast depreciating asset and six months timeline affects the price valuation of the motor vehicle. Though the law does not place a legal obligation on the 1st Defendant to conduct a valuation before selling a movable property, the price of Kshs. 500,000/- was reasonable and competitive in the circumstances.

80. Further, they submitted that that the Plaintiff is entitled to Kshs.139,027/- which balance had been duly communicated to the Plaintiff.

81. During the hearing, Mr. Katana provided a breakdown of the amount of Kshs. 500,000/- was used. The same is duly indicated in the loan account statement. The 2nd Defendant has provided receipts for payment of Kshs. 62,650/- to Citizen Auctioneers for Repossession of the MotorVehicle, Kshs. 30,000/- to Jomer Services who towed the motor vehicle, Kshs. 16,000/- paid to MOCO yard that stored the motor vehicle , the remaining amount was used to settle the loan balance of Kshs. 162,400/- and attendant expenses such as interest as indicated in the loan account statement annexed to the pleadings.

82. That consequently, the Plaintiff is entitled to Kshs. 139,027/- only, which he can access upon presenting account details or preferred mode of payment.

83. Upon the review of the evidence adduced, the law and submission by the parties, the Tribunal is not convinced that the motor vehicle was sold at the market value considering the margin of deviation between the value as contained in the valuation report of April, 2023 and the price at which the motor vehicle was sold in the month of November, 2023. The variation is Ksh. 510,000/=, which is more than half the price according to the valuation report in a span of about 6 months. The Tribunal however notes the condition of the motor vehicle at the time of the repossession. Having examined the valuation report annexed to the pleadings and produced by the Plaintiff, the Tribunal considers the forced market value of Ksh. 860,000/= as the least the defendants would have accepted in the circumstances. In any case, reserve price is always available at the instigation of the principal in a public auction.Whether the plaintiff is entitled to be paid for loss of income at Kenya Shillings Ninety Thousand (Kshs.90,000) per week together with interest at the court’s rate from 18/10/2023 until payment in full

84. The Plaintiff submitted that the subject motor vehicle has always been the Plaintiff’s primary tool of trade and as such he has suffered great financial loss due to the Defendants’ illegal and unprocedural actions of the defendants. He relied on the case of Jackson Mwabili v Peterson Mateli [2020] eKLR, the Court of Appeal in making its determination cited the case of Samuel Kariuki Nyangoti v Johaan Distelberger, where the appellant had claimed loss of user of his matatu which had been involved in an accident, it was stated as follows:“(16)The damages claimed by the appellant were in the nature of pecuniary loss which the law does not presume to be the direct, natural or probable consequence of the accident since it is subject of ascertainment by court through evidence and the application of the law relating to the measure of damages. In personal injury cases, the loss of business profits and loss of future earning capacity are usually in the nature of general damages. The loss of use of a profit-making chattel such as a lorry or matatu through an accident is similarly a claim in general damages. The standard of proof in such claims is on balance of probabilities and the principle of restitutio in integrum is applied in such cases.”

85. That the subject motor vehicle being the Plaintiff’s primary tool of trade, he was earning Kenya Shillings Ninety Thousand (Kshs.90,000) per week before the unprocedural and illegal actions of the Defendants herein. The receipts showing his weekly earnings have accordingly attached. He therefore asked the Tribunal to find the defendants liable to pay him for the loss of income at Kenya Shillings Ninety Thousand (Kshs.90,000) per week together with interest at the Court’s rate from 18/10/2023 until payment in full.

86. On their part, the defendants submitted that the Plaintiff is not entitled to any compensation in terms of loss of income since he never specifically pleaded the same in his pleadings and has not proved them. That the need to plead loss of income has also been emphasized since by specifically pleading, one has to set out what amounts would amount to profits, what expenses will be incurred including fuel, costs for drivers etc. That in this case, the Plaintiff only prayed for award of loss of income and no particulars were set out in the Plaint or witness statement.

87. They relied on the case of Hussein v Hakika Transport Services Limited & another (Civil Appeal 42 of 2022) [2023] KEHC 24903 (KLR) Chigiti J in dismissing a claim for loss of user/income held that:‘This court finds that in order to succeed, special damages must first be pleaded with specificity before discharging the burden of proving them through evidence. It is this court’s finding that the Appellant was not able to prove the same.’

88. That the Plaintiff did not discharge the obligation of specifically pleading the loss of income but only included it as a prayer And that With regard to loss of income, Court of Appeal in S J v Francessco Di Nello & another [2015] eKLR para. 14 held that:“Claims under the heads of loss of future earnings and loss of earning capacity are distinctively different. Loss of income which may be defined as real actual loss is loss of future earnings. Loss of earning capacity may be defined as diminution in earning capacity. Loss of income or future earnings is compensated for real assessable loss which is proved by evidence. On the other hand loss of earning capacity is compensated by an award in general damages, once proved.”

89. Further, in David Bagaine -vs- Martin Bundi (1997) eKLR, as cited with approval by Chigit J in Hussein v Hakika Transport Services Limited above the The Court of Appeal considered the issue of loss of user and held that:“We must and ought to make it clear that damages claimed under the title, "loss of user" can only be special damages. That loss is what the claimant suffers specifically. It cannot in the circumstances be equated to general damages to be assessed in the standard phrase "doing the best I can."

90. The defendants in a nutshell submitted that the loss of income is a special damage claim that need to be specifically proved.

91. That the Plaintiff generated receipts without any single evidence that any amount was indeed paid by him. He did not explain why there is no single week in which the tabulation of the receipts amounts to Kshs. 90,000/-. He does not account for the daily running expenditure of the motor vehicle, among other components that would otherwise help the Tribunal establish how much is payable.

92. Having reviewed the evidence, the law and submissions by the parties, the Tribunal is unable to ascertain whether the receipts attached by the Plaintiff showing the weekly earnings are exclusive to the proceeds from the subject motor vehicle or whether it includes the Plaintiff’s other earnings. We are therefore constrained to award the Plaintiff Ksh. 90,000/= per week as lost income. We however consider that the Plaintiff would have reasonably lost Ksh. 60,000/= per month from 18/10/2023 until payment in full.Whether the plaintiff is entitled to be paid general damages for attachment and sale of the plaintiff’s motor vehicle

93. The Plaintiff submitted that the 1st Defendant failed to manage the Plaintiff’s loan account effectively and as such issued him with a loan statement account for the period between 1st July, 2023 and 28th October 2023 indicating an amount of Kenya Shillings Two Hundred and Eighty Nine Thousand, Seven Hundred (Kshs.289,700) which was based on inaccurate and unconscionable interests and charges.

94. Further, that the defendants owed a duty of care to the Plaintiff when selling the motor vehicle but breached this duty by selling at a low price and without valuations, and at the same time without following the statutory provisions on execution under the Auctioneers Rules together with the Movable Property and Security Rights Act. On this basis, the Plaintiff asked the Tribunal to award general damages for the alleged illegal attachment and sale of the Plaintiff’s motor vehicle.

95. The defendants on the other hand submitted that the Plaintiff is not entitled to general damages. The nature of the relationship between the parties is purely contractual. The Plaintiff voluntarily accepted that in the event of default, his motor vehicle should be sold without notice to recover the debt. The same position was adopted in Kenya Women Microfinance Ltd v Martha Wangari Kamau [2021] Eklr where Justice Chacha Mwita allowed an appeal against an award for general damages in a breach of contract claim.

96. Upon the review of the pleadings, evidence, the law and the submission by the parties, the Tribunal finds that despite its findings above that the hurried repossession, unnotified sale and transfer was unjustified for the reasons stated, it is noteworthy that the Plaintiff had breached the terms of the loan agreement in relation to the payment of the monthly instalments. On the account of the breach on the part of the Plaintiff, we consider the claim for damages unmerited.

Who bears the costs of the suit 97. The Plaintiff asked the Tribunal for an award of costs of the suit as the suit was occasioned by the alleged illegal and unprocedural actions of the Defendants.

98. On their part the defendants submitted that costs be awarded in favour of the Defendants and more so since the Plaintiff had not issued a demand letter notifying it of the intention to commence the suit.

99. Based on the party’s pleadings, evidence, the law, submissions and our finding that the hurried repossession, unnotified sale and transfer of the subject motor vehicle was unjustified, we therefore award costs of this suit to the Plaintiff.

Determination and final orders 1. Based on our findings above we make the following orders that:a.The Tribunal has jurisdiction to hear and determine this matter.b.The Parties entered into a valid contract and the Plaintiff breached the contract by failing to pay the loan amount at the end of the 6 month contractual period.c.The hurried repossession, unnotified sale, transfer and registration of the subject motor vehicle by the 1st and 2nd Defendants to an innocent third party was not justified given the circumstances of this case and the status of the Plaintiff at the time.d.The motor vehicle was not sold at the market value and the defendants were duty bound. The Tribunal considers the forced market value of Ksh. 860,000/= as the least the defendants would have accepted in the circumstances. In any case, reserve price is always available at the instigation of the principal. The Tribunal therefore finds that the Plaintiff is entitled to damages of Kenya Shillings eight hundred and sixty thousand (860,000/=) being the forced value of the subject motor vehicle less the loan amount due of Kenya Shillings One Hundred Forty-Seven Thousand only (Kshs.147,000/=) together with interests at the Court’s rate from 18/10/2023 when the subject motor vehicle was attached until payment in full.e.Loss of income awarded to the Plaintiff at Ksh. 60,000/= per month from 18/10/2023 until payment in full.f.The defendants to bear the cost of this suit.Those then are the orders of this Tribunal

DATED AND DELIVERED AT NAIROBI THIS 12TH DAY OF SEPTEMBER, 2024. Dr. J. BETT - CHAIRMANR. KATINA - VICE-CHAIRHon. J. WERE - MEMBERA. GIKUYA - MEMBERA. KIBET - MEMBERJ K BIWOTT - MEMBERJudgement delivered virtually in the presence of:1. Ms Brian Otieno, advocate Hb for Mr. Ochieng for the Plaintiff2. Ms Mbuchi, Advocate for the defendants3. Mr. Isaac Kapelikinei- Tribunal Assistant