[2017] KEHC 3537 (KLR)

REPUBLIC OF KENYA

IN THE HIGH COURT OF KENYA AT EMBU

CIVIL APPEAL NO. 41 OF 2016

REMU MICROFINANCE BANK LTD............................ APPELLANT

VERSUS

ROBINSON MURIUKI NJERU………………………...RESPONDENT

J U D G M E N T

1. This appeal arose from the judgment of Embu Senior Resident Magistrate in CMCC No.299 of 2015. The respondent obtained judgment against the appellant for a permanent injunction restraining it, its servants, employees and agents from repossessing or in any way interfering with motor vehicle registration KBW 916 M belonging to the respondent. There was also an order directing the Executive Officer to execute the transfer of the vehicle in favour of the respondent.

2. The memorandum of appeal contends that the magistrate erred in ordering the appellant to file his submissions first before those of the respondent and that it was not served with the respondent's submissions which denied him the right of reply.

3. Secondly, the appellant faults the magistrate for failing to apply the relevant provisions of the law in he Sale of Goods Act, the Traffic Act and the chattels Transfer Act.

4. Thirdly, that the magistrate failed to analyze the evidence of the parties sufficiently as well as omitting to scrutinize the documents produced by the parties.

5. Finally, that the judgment of the court was bad in law, unjust, unfair and offered no justice to the parties.

6. The appellant is represented by Maitai Rimita & Co. Advocates while Mogusu and Company appears for the respondent. This appeal was argued by way of written submissions.

7. From the record of appeal, it appears that the 1st and the 2nd defendant did not defend the suit. The counsel on record for them Beth Ndorongo & Co. appeared during the hearing of the respondent's interlocutory application. Thereafter, the 1st defendant withdrew his advocate but never attended or participated in the proceedings. This appeal is against the respondent alone in whose favour the judgment was entered.

8. The issues arising from this appeal are as follows:-

(a) whether the magistrate's directions on the filing of submissions were were wrong and whether prejudice was caused to the appellant.

(b) Whether the magistrate erred in finding that the agreement for sale of vehicle was valid and that it superseded the registration of the vehicle in joint names of the appellant and the 1st defendant.

(c) Whether the magistrate analyzed the evidence of the parties so as to satisfy himself as to the burden of proof.

(d) Who should meet the costs of the suit.

9. The duty of the 1st appellate court was explained in the case of SELLE AND ANOTHER VERSUS ASSOCIATED MOTOR BOAT COMPANY LTD & OTHERS [1968] EA 123,where it was observed thus:-

An appeal to this Court from a trial by the High Court is by way of retrial and the principles upon which this Court acts in such an appeal are well settled. Briefly put they are that this court must reconsider the evidence, evaluate it itself and draw its own conclusion. Though it should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in this respect. In particular, this Court is not bound necessarily to follow the trial Judges findings of fact if it appears either that he has clearly failed in some point to take account of particular circumstances or probabilities materially to estimate the evidence or if the impression based on the demeanor of a witness is inconsistent with the evidence on the case generally.

10. On the first issue on directions, the relevant provision is Order 18 Rule 1 and 2.

1. The plaintiff shall have the right to begin unless the court otherwise orders.

2. Unless the court otherwise orders—

(1) On the day fixed for the hearing of the suit, or on any other day to which the hearing is adjourned, the party having the right to begin shall state his case and produce his evidence in support of the issues which he is bound to prove.

(2) The other party shall then state his case and produce his evidence, and may then address the court generally on the case. The party beginning may then reply.

(3) After the party beginning has produced his evidence then, if the other party has not produced and announces that he does not propose to produce evidence, the party beginning shall have the right to address the court generally on the case; the other party shall then have the right to address the court in reply, but if in the course of his address he cites a case or cases the party beginning shall have the right to address the court at the conclusion of the address of the other party for the purpose of observing on the case or cases cited.

(4) The court may in its discretion limit the time allowed for addresses by the parties or their advocates.

11. It is clear from the provision that the plaintiff presents his case first and the defendant follows. After the close of the defendant's case, the defendant may address the court generally and the plaintiff replies. This general address refers to the submissions. The court also has the discretion to give directions it deems fit depending on the facts of the case. I find that no prejudice was caused to the appellant in the directions given.

12. The appellant had the right of reply to the defendant's submissions. It was therefore wrong for the defendant's counsel to fail to serve the appellant and for the magistrate to fail to ensure that the plaintiff was given his right.

13. It is my considered opinion that since the appellant had ventilated his case through the submissions initially filed, I do no think that the omission to serve would have changed the outcome of the case.

14. The appellant argued the 2nd, 3rd and the 4th grounds together which relate to the alleged failure by the magistrate to consider the provisions of the Sale of Goods Act, the Traffic Act and the Chattels Transfer Act and to analyze the evidence of the parties. It was argued that the agreement between the 1st defendant and also omitted the respondent was not registered as required by Section 9(1) of the Traffic Act Cap 403 and was not valid.

15. Section 9(1) provides:-

No motor vehicle or trailer the ownership of which has been transferred by the registered owner shall be used on a road for more than fourteen days after the date of such transfer unless the new owner is registered as the owner thereof.

16. Relying on Section 8 of the same Act the appellant argued that 1st defendant and himself were the owners of the vehicle KBW 619 M. The section provides:-

The person in whose name a vehicle is registered shall, unless the contrary is proved, be deemed to be the owner of the vehicle.

17. The evidence of the respondent was that he entered into an agreement for sale of motor vehicle KBW 619 M on 24/03/2014 at a cost of Kshs.600,000/=.He paid a deposit of Shs.450,000/= leaving a balance of Kshs.150,000/=. The balance was payable on delivery of the original log book, a signed transfer form, a copy of pin and identity card of previous owner. The respondent said he took possession of the vehicle but despite demand, the 1st defendant did not avail the said documents.

18. It was on 31/10/2015 that the vehicle was repossessed on instructions of the appellant for the reason that it was a security of a loan advanced to the 1st defendant. It was argued that the respondent having bought and taken possession of the vehicle before the loan transaction, the vehicle belonged to him.

19. The appellant through its branch manager testified that it advanced a business loan of Kshs.1,000,000/= to the 2nd defendant who presented three vehicles as securities including the one in issue registration number KBW 619 M. The said motor vehicles were then registered in the joint names of the 1st defendant and the appellant. Due to the default of the loan repayments, the appellant repossessed the vehicles. He said he was not aware of the alleged purchase of the vehicle KBW 619 M by the respondent to which he refers to as a fraud.

20. In a case where fraud is attributed to a party, it is necessary to closely scrutinize the relevant documents produced in the case so as to interrogate their authenticity. The agreement dated 24/03/2014 states that the payment of Shs.450,000/= “shall be” acknowledged and that the deposit will be paid on handing over the relevant documents.

21. The 1st defendant was in car sale business at the time he sold the vehicle from which he earned his living. The vehicle was assessed at the value of Kshs.780,000/= according to the valuation report dated 5/03/2014. the vehicle which was in good condition as per the report was sold only 20 days later at a reduced value of Shs.600,000/=. In the absence of the 1st defendant in the proceedings, the respondent did not give any explanation of the price reduction.

22. It is not practical for the 1st defendant to lose Kshs.180,000/= for a single vehicle from the actual valuation made the same month of the sale. The amount was quite substantial.

23. The respondent said he insured the vehicle with CIC Insurance Co. Ltd. after he took possession. He produced in evidence only an insurance cover note of one month running from 4/03/2014 was not produced although it was the current one at the time the cause of action arose.

24. The case CMCC No. 300 of 2014 was filed on 3/11/2015 three days after the repossession. The respondent had plenty of time to prepare documents for his case.

25. The respondent said that he entered into the sale agreement with the 1st defendant on 24/03/2014 and took possession as per the agreement that is on the same day of execution. There was no explanation why the respondent had to take insurance cover on 4/03/2014 about 20 days before he took possession of the vehicle. Yet he was not a position to produce the insurance cover for the period her was in possession 24th March to 31st October 2014.

26. The date of inspection report is indicated as 3/03/2014 while the date of the report is 5/03/2014. The 2nd page of the report which explains the mechanical and general condition of the vehicle bears the date of 25/03/2014. The discrepancy in the dates was not explained.

27. The analysis of the insurance and discrepancies in the valuation report raises doubt on the authenticity of the said documents.

28. The agreement had a defaulter's clause for a penalty of 35% payable by the defaulting party. The evidence of the respondent was that the 1st defendant defaulted by not submitting the original logbook and the transfer documents despite demand. He also breached the agreement by using the vehicle as collateral for a loan facility.

29. It seems the respondent moved to court almost two years later in an effort to save the vehicle from repossession. It raises the question as to why the issue of breach by the 1st defendant especially of failing to provide transfer documents was not addressed by the respondent. He did not claim the agreed penalty from the 1st defendant which was his right. The deposit of Kshs.450,000/= was quite substantial and should have been followed through for refund or for execution of the agreement.

30. On the side of the 1st defendant, there is no doubt that he was going through very difficult financial times which drove him into defaulting the first installment of the loan. Here was a client in the name of the respondent was owing him a substantial amount of money of Kshs.150,000/=. It does not make sense as to why the 1st defendant was not in a hurry to demand this money from a customer who had stayed for two years without paying the balance.The respondent was also not in a hurry to get the vehicle transferred to his name until the appellant came to the scene to repossess the vehicle.

31. There is no doubt that the 1st defendant was in breach of the agreement and no action had been taken by the respondent. The question is whether this agreement was still valid at the time the appellant entered into the arena and obtained the vehicle as a collateral. The requirement of the law is that registration of ownership by the purchaser be done within 14 days of the agreement.

32. The respondent wants the court to believe that he continued using a vehicle whose ownership/title had not been passed to him and found no urgency to push the seller for transfer. The truth of the matter must be that the alleged agreement was not in existence.

33. The vehicle KBW 916 M was registered in the joint names of the 1st defendant and the appellant following the due process of the law on 24/07/2014. Section 8 of the Traffic Act provides that the registered owner of any vehicle is deemed to be the owner. The learned magistrate ought to have applied the relevant provisions of the law in determining the ownership of the vehicle.The court relied only on the fact that the appellant did not conduct due diligence before taking the vehicle as a collateral for the loan advanced to the 1st defendant. He also said that the appellant did not physically examine the vehicle and believed the respondent's evidence that the vehicle was in his possession at the time of registration.

34. The appellant had a valid contract with the 1st defendant in which he advanced the loan that was not paid in accordance with the terms of the agreement. The 1st defendant had bound himself to repay the loan as agreed and in default, the appellant was entitled to take all the necessary steps to facilitate recovery. The repossession document issued by Viewline Auctioneers in respect of vehicle registration number KBW 916 M was valid since it was grounded on the agreement of the parties.

35. The magistrate failed to scrutinize the documents of the parties which were a very important part of the evidence and were crucial in establishing the possession of the vehicle by the respondent during the period in question as well as the ownership of the appellant. It is my considered opinion that this omission by the court resulted in reaching wrong finding.

36. The record shows that the issue of fraud which was pleaded by the defendant was not interrogated in the judgment. From the evidence and the conduct of the 1st and 2nd defendant of keeping away from of the proceedings, this court finds that there was a conspiracy by the two defendants on one hand and the respondent on the other hand to defraud the appellant of his legal right of the security in form of motor vehicles registration number KBW 916 M and this frustrated the recovery of the loan facility.

37. The respondent did not satisfy the requirement for grant of a permanent injunction against the appellant in respect of the vehicle registration No. KBW 916 M. The appellant was already a co-owner of the said vehicle with a legitimate interest that required to be protected by the law.

38. All the foregoing issues considered, the respondent failed to discharge the burden of proof in the case against the appellant. The magistrate therefore erred in entering the judgment in the respondent's favour.

39. In effect therefore, I allow this appeal. The judgment of the learned magistrate is hereby set aside and substituted with an order for dismissal of the respondent's case with costs.

40. The respondent will meet the costs of this appeal and the court below.

41. It is hereby so ordered.

DELIVERED, DATED AND SIGNED AT EMBU THIS 18TH DAY OF SEPTEMBER, 2017.

F. MUCHEMI

JUDGE

In the presence of:-

Ms. Ndorongo for Rimita for the appellant