https://new.kenyalaw.org/akn/ke/judgment/scc/2026/45

Smep Microfinance Bank PLC v Calsta International Ltd & 3 others (Commercial Case E500 of 2024) [2026] SCC 45 (KLR) (29 June 2026) (Judgment) Neutral citation: [2026] SCC 45 (KLR) Republic of Kenya In the Milimani Small Claims Court Commercial Case E500 of 2024 GW Kiamah, RM June 29, 2026 Between Smep Microfinance Bank Plc Claimant and Calsta International Ltd 1st Respondent Irene Adhiambo Zasha t/a Zasha Auctioneers 2nd Respondent Leaky Storage Ltd 3rd Respondent Lunga Lunga Energy Limited 4th Respondent Judgment 1.The claimant instituted this suit via the amended statement of claim dated 21/1/2025 seeking judgment against the 1st respondent for Kshs. 570,581.72.00/=, and orders against the 2nd to 4th respondents restraining them and their representatives from disposing of the subject motor vehicle KCJ 905K until the sum owed by the 1st respondent was fully repaid. 2.The claim was on the basis that the 1st respondent had borrowed a loan of Kshs. 500,000/= from the claimant secured by the subject vehicle. That he fell into arrears of Kshs. 570,581/= s of 24/1/2024 but when it attempted to execute its rights against the security, the claimant discovered that the vehicle had been repossessed by the 2nd respondent at the instructions of the 4th respondent and the same was stored at the 3rd respondent’s premises. 3.That the 4th respondent issued such instructions in execution of judgment entered in Kajiado SCCOM E146 of 2023 for Kshs. 660,789/= against the 1st respondent. That the respondents had failed to return the subject vehicle to the claimant despite demand and the claimant was unable to recover the arrears owed by the 1st respondent. 4.The 1st respondent filed an amended response dated 3/2/2025 and admitted the loan. That the 2nd to 4th respondents repossessed the subject vehicle without authority and declined to release it yet it was used for business. That he thus lacked income to settle the monthly loan payments leading to the arrears. The 1st respondent contested to the release of the vehicle to the claimant to enable it sell the same and recover the pending amounts. 5.The 3rd respondent filed the response dated 9/12/2025 and averred that it was in the business of storage of motor vehicles. That it entered into an agreement with the 2nd respondent to store the subject vehicle at its yard. That it simply acted on instructions and had released the vehicle to one Kennedy Otieno on 11/1/2024 pursuant to the 2nd respondent’s written instructions. It was also alleged that the 3rd respondent had no contractual relationship with the claimant in relation to the subject vehicle. 6.The 2nd and 4th respondent’s did not file any response thus the claimant’s allegations against them remained un-contravened. 7.The matter proceeded under Section 30 of the Small Claims Act and the claimant filed submissions dated 25/1/2026 whereas the 3rd respondent’s were dated 22/5/2026. 8.I have seen and considered the pleadings, testimonies, evidence and submissions before court. The main issue for determination is whether the claimant has proven the claim as against the respondent to the required standards. 9.The standard of proof in civil claims is on a balance of probabilities. See the Court of Appeal in Mumbi M'Nabea v David M.Wachira [2016] eKLR. 10.Sections 107, 108 and 109 of the Evidence Act, Chapter 80 of the Laws of Kenya places the burden of proof of a fact on the person who wishes the court to believe in the existence of such fact. 11.It is not denied that the 1st respondent had taken out a loan facility with the claimant. The claimant admitted going into arrears and attributed the same to the 2nd, 3rd and 4th’s unlawful repossession of the subject vehicle which had secured the loan. That he would use the vehicle for business and upon repossession, he was unable to generate income and pay the monthly instalments thus the arrears. The claimant and 1st respondent pleaded that the repossession was in satisfaction of the judgment award in Kajiado SCCOMM E146 OF 2023. 12.I have seen the said judgment delivered on 28/2/2024. From paragraph 17 and 18 thereof, the court found that there was a valid contract between the claimant and 1st respondent therein for the supply of gas and the claim against the 1st respondent for the sum of Kshs. 660,789/= was allowed. Whereas the court found that the 1st respondent was liable to settle the amount, there was no mention or insinuation that the 2nd respondent, who is the 1st respondent herein, was liable to settle the claim therein. 13.I do also note that the court declined to pronounce itself on the 2nd respondent’s counter-claim wherein he sought for release of the subject motor vehicle on grounds that it had been illegally repossessed causing him to fall into arrears. The Court recognized the pendency of the instant claim touching on the same issue and restrained from issuing release orders. 14.From that, it is evident that the claimant had always challenged the repossession of the subject vehicle. Even if the 1st respondent was liable to settle the judgment in the above suit, the 2nd and 4th respondents did not file a response to establish that they followed legal processes in repossessing the vehicle. There were no warrants or statutory processes produced to demonstrate lawful repossession. 15.I do note that the claimant produced a log book indicating that it was co-registered as an owner of the subject vehicle alongside the 1st respondent. As such, as a co-owner and secured creditor, the claimant had a legal protected interest in the subject vehicle that could not be defeated without due process. I say so noting that a secured creditor with registered interest has priority over subsequent execution creditors and the claimant’s interest could not be overridden without due process. The failure by the 2nd and 4th respondents to file any response or tender evidence leads to the conclusion that the repossession was irregular and un-procedural. 16.Further, it is trite that in law, a secured creditor with a registered interest ranks in priority over subsequent claims unless lawfully displaced. As a creditor and registered co-owner of the subject vehicle, I do find that the claimant had a superior right to the vehicle over the 2nd and 4th respondents. 17.As regards the 3rd respondent, I do find that it was able to establish that it acted on the 2nd respondent’s instructions to store the subject vehicle and had already released the same as per the instructions from the 2nd respondent. There was on record the release letter as well. As such, the 3rd respondent was absolved from liability. 18.In the end, I find that the claimant’s claim is merited and hereby order as follows: -1.Judgment is hereby entered in favor of the claimant as against the 1st respondent for the sum of Kshs. 570,581.72/= plus interest at court rate from the date of judgment till payment in full.2.A permanent injunction hereby issues as against the 2nd and 4th respondents restraining them either by themselves, their agents and assigns from selling, transferring or otherwise interfering with motor vehicle registration KCJ 905K until the sum in clause (1) above is fully settled.3.The 2nd and 4th respondents are hereby ordered to release the subject motor vehicle KCJ 905K to the claimants forthwith.4.Upon release of the said motor vehicle, the claimant shall be at liberty to realize its security by way of sale of motor vehicle registration number KCJ 905K and apply the proceeds thereof towards liquidation of the outstanding loan arrears, in accordance with the law.5.In default of compliance with order (3) above after expiry of the stay period, the Court reserves liberty to issue appropriate enforcement orders, including sanctions permitted by law.6.The 3rd respondent is hereby absolved from liability.7.The claimant is awarded costs of the claim assessed at Kshs. 30,000/=. The same shall be borne by the 1st, 2nd and 4th respondents jointly and severally. 19.The 1st, 2nd and 4th respondents are awarded 30 days stay of execution.It is so decreed. DATED AND DELIVERED AT NAIROBI VIA CTS THIS 29TH DAY OF JUNE 2026HON. GLADYS .W. KIAMAHRESIDENT MAGISTRATE/ADJUDICATOR