[2022] KEHC 15658 (KLR)

Tolo v Thabiti Finance Co Ltd & another (Civil Case 192 of 1993) [2022] KEHC 15658 (KLR) (16 November 2022) (Judgment)

Neutral citation: [2022] KEHC 15658 (KLR)

Republic of Kenya

In the High Court at Kisumu

Civil Case 192 of 1993

RE Aburili, J

November 16, 2022

Between

Benjamin Okang Tolo

Plaintiff

and

Thabiti Finance Co Ltd

1st Defendant

Matani Care Limited

2nd Defendant

Judgment

Introduction 1. The plaintiff herein Benjamin Okang Tolo vide a further amended plaint dated October 8, 2020 and filed in court on the March 17, 2021 sought the following reliefs against the defendants, jointly and severally:a)General damagesb)Temporary and permanent injunctionc)Defendant No.1 do hereby produce the accounts for examination by court and partiesd)Special damages in the sum of Kshs 184,704,785. 03 being the total loss suffered by the plaintiff for the period June 1982 to December 2017 as per the Report of the Certified Public Accountant, CPA Archelaus Nokwe Achieng No 1355e)Costs be provided forf)Interest at court rates andg)Any other remedy the Honourable Court deems fit and reasonable.

2. It is the plaintiff’s claim vide his pleadings that he was advanced 3 separate loans at separate times by the 1st defendant and that in each case he cleared the first loan before seeking the next.

3. The plaintiff avers that the first loan of Kshs 200,000 advanced on June 2, 1982 was fully repaid together with the applicable interest by December 1, 1982 and the guarantor M/S Nile Investment CA Limited set free from its obligation; that the second loan of Kshs 800,000 was overpaid in the amount of Kshs 227,966. 75 by January 17, 1984 and the third loan of Kshs 1,200,000 was also overpaid by Kshs 4,443,555. 28 as at March 26, 1996.

4. The plaintiff further avers that the statement of accounts prepared by the 1st defendant however continuously reflected that the plaintiff still owed it a colossal amount of money and further that the interest rates charged by the 1st defendant during the pendency of loan also varied but the plaintiff was never notified of the said variations.

5. The plaintiff averred that on or about March 20, 1984, he read in the Daily Nation dated April 26, 1983 that the 1st defendant had instructed a firm of auctioneers to sell by public auction the plaintiff’s securities namely; Kisumu/Tamu/823,824,858 and 859 together with Kisumu Municipality/Block 5/42 and 193.

6. It is the plaintiff’s further assertion that the 1st defendant proceeded to auction the charged properties despite the plaintiff having repaid all the monies borrowed which sale the plaintiff avers was fraudulent and malicious.

7. The plaintiff pleaded fraud and malice on the part of the 1st defendant for the following reasons:i.The loans had been repaid in full,ii.The auctioneers instructed failed to provide the valuation of all the properties intended for sale,iii.The defendant had given three different conflicting statements over the same period which was a clear indication that the defendant was mismanaging the said account,iv.That there was concealment of material facts,v.There was no proper notice of sale given as stipulated by law.

8. He claimed that that through a certified public accountant, he discovered that he suffered a loss of Kshs 184,704,785. 03 from the loan overpayment/interest and loss suffered from the sale of Kisumu /Tamu/823,824,858 and 859 together with Kisumu Municipality/Block 5/42 and 193 due to their undervaluation and income loss due to sale.

9. The plaintiff asserts that by an agreement dated June 21, 1990 he agreed with the 2nd defendant that the 2nd defendant would be paying rent directly to the 1st defendant’s bank in Nairobi and that the 2nd defendant paid the rents for the second half of 1991 up to 1998 when the 2nd defendant defaulted.

10. The plaintiff avers that as a result of the 2nd defendant’s default, the 1st defendant mismanaged the plaintiff’s account by charging unlawful debits occasioning damage on the plaintiff and as such the 2nd defendant ought to be compelled to pay the 1st defendant. The plaintiff called 3 witnesses in support of its case.

11. The 1st defendant filed its amended statement of defence dated March 31, 2021 denying the plaintiff’s claims and contending that the plaintiff was its customer whom it advanced loans and that he defaulted in his obligation to repay the said loan causing the 1st defendant to recall the entire outstanding loan which demand the plaintiff failed to comply with.

12. It is the 1st defendant’s defence that consequently its statutory right to realise the securities crystallised. The 1st defendant denied that it gave the plaintiff conflicting and confusing statements or that it introduced new charging system as alleged by the plaintiff.

13. The 1st defendant further contends that it is not liable for the alleged special damages prayed for by the plaintiff and that the said claim is a new cause which is statute barred.

14. The matter proceeded to hearing on the 2/12/2021 with the plaintiff calling three witnesses and the 1st defendant calling one witness. Both parties relied on their respective witness statement which were duly filed as their evidence in chief and were cross examined and they produced as exhibits the documents which were filed earlier on and exchanged.

15. The testimonies of the plaintiff and his witnesses and that of the defendant’s witness reiterate the pleadings in the further amended plaint and amended defence respectively. That evidence is assessed in the body of this judgment.

The Plaintiff’s Submissions 16. The plaintiff submitted that the 1st defendant did not act in good faith and breached its duty of care in the sale and disposal of Kisumu/Tamu/823, 858 and 859 as is demonstrated by the issuance of different conflicting statements to the plaintiff over the same period. It is further submitted that the 1st defendant also concealed material facts relating to the loan including contradiction in interest rates.

17. The plaintiff relied on the case of National Industrial Credit Bank Limited v Aquinas Francis Wasike & another [2015] eKLR where the court of appeal faulted the appellant for using wrong computation as a basis for repossession deeming the repossession unlawful and premature.

18. The plaintiff submitted that the plaintiff went against the duplum rule contrary to section 44A of the Banking Act by charging interest far much higher than the principal sum even in purported default that did not exist and as was held in the case of Francis Mbaria Wambugu v Jijenge Credit Limited [2020] eKLR. The plaintiff submitted that thus the 1st defendant sold the plaintiff’s property unlawfully.

19. It was further submitted that the sale of the plaintiff’s property through public auction was unlawful and unjust as the property was sold at a price that was way below the forced sale value and the 1st defendant failed to consider both the interests of the plaintiff and the law when conducting the sale in direct contravention of the repealed section 77 of the Registered Land Act and section 97 of the current Land Act. Reliance was placed on the cases of Grace Wangui Njoru & another v Equity Bank Limited & another[2018] eKLR and that of Komassai Plantations Ltd v Bank of Baroda (K) Ltd [2015] eKLR.

20. The plaintiff submitted that his properties were sold through public auction over two decades ago and that the option of equity of redemption was long gone and that the only remedy available was that of general and special damages as pleaded in his plaint. Reliance was placed on the case of Bomet Beer Distributors Ltd &anorv Kenya Commercial Bank Ltd & 4 others[2005] eKLR.

21. On costs of the suit, the plaintiff submitted that he was entitled to the costs. He relied on the case of Sonko v Clerk, County Assembly of Nairobi City & 12 others[2022] KESC 17 KLR.

1st Defendant’s Submissions 22. It was submitted that that the 1st Defendant exercised its statutory power of sale over Kisumu/Tamu/824, Kisumu/Tamu/858 and Kisumu/Tamu/859 because of the Plaintiff’s default to repay the Facilities and in particular as stipulated under the 3rd Facilities and the 2nd Charge, being the security instrument thereto.

23. The 1st defendant submitted that the unequivocal admissions by the Plaintiff through his own letters dated July 5, 1994 and dated 24/06/94 and other exhibits are prima facie evidence of his indebtedness to the 1st Defendant and placed reliance on the case of Karmali v Shah [2000] 2 EA 392 in support of this position.

24. It was therefore submitted that the gravamen of the Plaintiff’s claim that the 1st Defendant was not entitled to sell the auctioned properties based on the allegation that the 1st Defendant varied the interest rates payable under the Facilities without notice to the Plaintiff thus leading the plaintiff to overpay the loans falls in light of the scrutiny during cross examination of the Plaintiff’s witnesses.

25. The 1st defendant submitted that parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved as was held in the cases of National Bank of Kenya Limited v Pipeplastic Samkolit & another [2001] KLR 112 and Fina Bank Limited v Spares and Industries Limited [2000] 1 EA 52 and thus this Honourable Court must reject the invitation by the Plaintiff to make contracts for parties and proceed to uphold that the Charge provided for an interest of 16% per annum and the penalty rate of 3% p.a but reserved the right of the Bank to increase the applicable rate at its own discretion without prior notice to the Plaintiff.

26. It was submitted that the discretion to vary the interest rate was exercised by the 1st Defendant reasonably and with due regard to the guidelines issued by CBK through various Circulars and Gazette Notices as exhibited and that it was a matter of judicial notice that the subject loan was active during a period when there was high mobility in the interest rates regime in the country.

27. The 1st defendant submitted that once the Suit Properties were provided as security for the Facilities advanced to the Plaintiff, they became commodities for commercial transactions that would be liable for sale by public auction through the exercise of a statutory power of sale in case the Plaintiff defaulted in its repayment obligations. Reliance was placed on the case of Andrew M Wanjohi v Equity Building Society & 7 others [2006] eKLR, where the court held inter alia that"by offering the suit property as security, the chargor was equating it to a commodity which the chargee may dispose of, so as to recover his loan together with the interest thereon.”

28. On the duty to conduct a valuation prior to the sale and any breach of duty of care arising therefrom, it was submitted that the said claim is unstainable for two (2) reasons, firstly, the same are barred by virtue of limitation of actions and secondly, that the Plaintiff failed to discharge the burden of proving that the 1st Defendant sold the auctioned properties at an undervalue thus occasioning a breach of its duty of care

29. The 1st defendant submitted that the issue of sale at an undervalue was belatedly introduced into these proceedings after the lapse of twelve years which was prejudicial to the 1st Defendant in that it was not possible to trace the relevant evidence prior to the trial of this matter as was explained by DW1. Reliance was placed on the case of Dhanesvar Mehta v Manilal M Shah [1965] 1 EA 321, where it was held that:“The object of any limitation enactment is to prevent a plaintiff from prosecuting stale claims on the one hand, and on the other hand to protect a defendant after he had lost the evidence of his defence, from being disturbed after a long lapse of time.”

30. It was submitted that the valuation reports produced by PW3 are not sufficient to prove that Kisumu/Tamu 859 & 824 were sold at an undervalue because the Valuation Reports are not reliable. On the weight a court of law should attach on expert opinion, reliance was placed on the case of Stephen Kinini Wang’ondu v The Ark Limited, [2016] eKLR

31. The 1st defendant submitted that that in the case of Komassai Plantations Ltd v Bank of Baroda (K) Ltd the court stated that it had no legal obligation to obtain the then prevailing market price of the suit property. Accordingly, the 1st defendant submitted that the plaintiff had failed to prove on a balance of probabilities that the auctioned properties were sold at an undervalue and consequently, there was no breach of the duty of care owed to the Plaintiff.

32. On the reliefs being sought from this Honourable Court, it was submitted that the plaintiff has abandoned the prayers for injunction and provision of accounts as his submissions are limited to general and special damages.

33. On the special damages sought, it was submitted that the claim is barred by section 19 of the Limitation of Actions Act, the same having been introduced more than 12 years after the cause of action arose. Reliance was placed on the case of Iga v Makerere University [1972] EA where it was held that,“The Limitation of Actions Act does not extinguish a suit or action itself but operates to bar the claim or remedy sought for and when a suit is time barred the court cannot grant the remedy or relief.”

34. Further, it was submitted that the claims for special damages, in particular the claim for capital gains on one hand and loss of income on the other, are a duplication of each other and granting both would be tantamount to unjust enrichment as is evidenced by the fact that the plaintiff abandoned these monetary claims during cross -examination and stated that he was only claiming that his properties were sold without a valuation.

35. The 1st defendant submitted that special damages must be specifically pleaded and proved and that in this case the Plaintiff sought to rely on the Audit Report prepared by PW-2 as proof of his claim for special damages whereas PW2 admitted that he used account statements prepared by the Plaintiff to demonstrate that his properties had been sold at an undervalue and further admitted to not considering the interest rates stipulated under the Charge documents and as such his report was not credible and could not be relied upon to discharge the burden of proving special damages.

36. On whether the Defendant should pay costs of this suit it was submitted that the costs should follow the event and should the suit be dismissed as submitted, then the 1st Defendant should be awarded its costs.

37. It was therefore submitted that the Plaintiff failed to prove his case on a balance of probabilities and his suit should be dismissed.

Analysis and Determination 38. I have considered the pleadings by both parties, their witness statements as adopted on oath in their oral testimonies and the rival submissions as filed before this court and in my view, the issues for determination raised by both parties in their pleadings as submissions are:i.Whether the defendant’s sale of the charged properties was unlawful.ii.Whether the court should grant special damages in the sum of Kshs 184,704,785. 03 as claimed by the plaintiff.iii.Whether the court should order the 1st defendant to produce the accounts for examination by court and parties.iv.Whether the court should grant temporary and permanent injunction in favour of the plaintiff.v.Who should be awarded costs?

Whether the defendant’s sale of the charged properties was unlawful 39. It is the plaintiff’s case that the 1st defendant erred in selling his properties as the computation they used to arrive at the plaintiff’s default was erroneous. The plaintiff further points to the conflicting statements forwarded to him by the 1st defendant as prove that his default was erroneously calculated. He averred in his pleadings that he had repaid the loans in full.

40. On its part, the 1st defendant avers that it exercised its statutory power of sale over Kisumu/Tamu/824, Kisumu/Tamu/858 and Kisumu/Tamu/859 because of the Plaintiff’s default to repay the Facilities and in particular as stipulated under the 3rd Facilities and the 2nd Charge, being the security instrument thereto.

41. That the burden of proof was on the plaintiff to prove its case is not in doubt. In Evans Nyakwana v Cleophas Bwana Ongaro [2015] eKLR it was held that:“As a general preposition the legal burden of proof lies upon the party who invokes the aid of the law and substantially asserts the affirmative of the issue. That is the purport of section 107(i) of the Evidence Act, Chapter 80 Laws of Kenya. Furthermore, the evidential burden…is cast upon any party, the burden of proving any particular fact which he desires the court to believe in its existence. That is captured in Section 109 and 112 of law that proof of that fact shall lie on any particular person…The appellant did not discharge that burden and as Section 108 of the Evidence Act provides the burden lies in that person who would fail if no evidence at all were given as either side.”

42. As to what amounts to proof on a balance of probabilities was explained by Kimaru, J (as he then was) in William Kabogo Gitau v George Thuo & 2 others [2010] 1 KLR 526 that:“In ordinary civil cases, a case may be determined in favour of a party who persuades the court that the allegations he has pleaded in his case are more likely than not to be what took place. In percentage terms, a party who is able to establish his case to a percentage of 51% as opposed to 49% of the opposing party is said to have established his case on a balance of probabilities. He has established that it is probable than not that the allegations that he made occurred.”

43. In this case, the plaintiff’s admissions through his own letters dated July 5, 1994 and dated 24/06/94 provide proof that he was indeed indebted to the 1st Defendant. The plaintiff further testified that he was advanced a loan of Kshs 1,200,000/- on March 20, 1984 which was for a period of 24 months and repayment was by instalments of Kshs. 60,108 and in addition to the interest rate of 16% per annum, there was also a penalty rate of 3%.

44. The plaintiff testified that the 3rd Facility was secured by a Charge over various properties, namely; LR No Kisumu/Block 5/193, LR No Kisumu/Block 5/42, LR No Kisumu/Tamu/83, LR No Kisumu/Tamu/824, LR No Kisumu/Tamu/858 and LR No Kisumu/ Tamu/589 and that the 3rd Charge similarly stipulated that the Bank may change the rate of interest without notice to him. It was his testimony that as at February 1993, he had accumulated arrears of Kshs 296,295. 10 yet the loan was for a term of 24 months from April 1984 which he admitted led to the activation of the penalty interest rate over and above the 16% interest. He admitted to entering an arrangement with the 2nd Defendant sometimes in July 1994 to have the arrears due to the 1st Defendant settled by rent proceeds which arrangement failed to materialize.

45. According to the 1st defendant, in selling the plaintiff’s property, it was exercising its statutory power of sale over Kisumu/Tamu/824, Kisumu/Tamu/858 and Kisumu/Tamu/859 because of the Plaintiff’s default to repay the Facilities and in particular as stipulated under the 3rd Facilities and the 2nd Charge, being the security instrument thereto.

46. It was therefore submitted by the 1st defendant in contention that the gravamen of the Plaintiff’s claim that the 1st Defendant was not entitled to sell the auctioned properties based on the allegation that the 1st Defendant varied the interest rates payable under the Facilities without notice to the Plaintiff thus leading the plaintiff to overpay the loans falls in light of the scrutiny during cross examination of the Plaintiff’s witnesses.

47. From the evidence placed before this court, there is clear evidence that the plaintiff was in default and that the 1st defendant gave him several notices to settle the same to no avail.

48. It was the plaintiff’s case that the 1st defendant coupled his loan with numerous interest rates that were unexplained to him and which were charged without notice to him. The evidence on record shows that the loan advanced to the plaintiff attracted an interest rate of 16% and further that there was a penalty rate of 3% in case of delay to pay the instalments as they fell due.

49. I have read the clause on interest of the charge entered into between the plaintiff and the 1st defendant which clause stated as follows:“…together with simple interest at sixteen (16) per centum per annum or at such rate as Thabiti shall in its sole discretion from time to time decide Provided Alwaysthat Thabiti shall not be required to advise me/us or the borrower prior to any change in the rate of interest so payable andProvided Furtherthat Thabiti shall be at liberty without any prior consultation with the Borrower and ….. to instead charge a penalty at the rate of three (3) per centum per annum on any repayment instalments… which shall fall in arrears ….”

50. The position in law with regard to the binding nature of a contract executed willingly between the parties thereto has now followed a well beaten path. In National Bank of Kenya Ltd v Pipe Plastic Samkolit (K) Ltd & another [2001] eKLR, the Court was categorical that:“It is clear beyond peradventure, that save for those special cases where equity might be prepared to re-leave a party from a bad bargain, it is ordinarily no part of equity’s function to allow a party to escape from a bad bargain.”

51. The Court in Pius Kimaiyo Langat v Co-operative Bank of Kenya Ltd [2017] eKLR, after reviewing case law on the subject reiterated as follows:“We are alive to the hallowed legal maxim that it is not the business of Courts to rewrite contracts between parties. They are bound by the terms of their contracts, unless coercion, fraud or undue influence are pleaded and proved.”

52. The plaintiff having signed the loan agreement and the subsequent charge document is bound to honour them. The plaintiff has not adduced any evidence of coercion, fraud or undue influence by the 1st defendant to warrant this court interfering with the aforementioned contracts.

53. The plaintiff further faulted the 1st defendant’s sale of the charged properties on account that he undervalued them. On this, the plaintiff relied on the expert witness evidence adduced by PW3, a certified valuer, who produced his Valuation Reports as PEx2.

54. On the weight a court of law should attach on expert opinion, in the case of Stephen Kinini Wang'ondu v The Ark Limited [2016] eKLR it was held that:“Expert testimony, like all other evidence, must be given only appropriate weight. It must be as influential in the overall decision-making process as it deserves; no more, no less. To my mind, the weight to be given to expert evidence will derive from how that evidence is assessed in the context of all other evidence. Expert evidence is most obviously needed when the evaluation of the issues requires technical or scientific knowledge only an expert in the field is likely to possess. However, there is nothing to prevent reports for court use being commissioned on any factual matter, technical or otherwise, provided; it is deemed likely to be outside the knowledge and experience of those trying the case, and the court agrees to the evidence being called.”

55. In this case, in PW3’s testimony on the valuation Report for Kisumu/Tamu 823, he admitted that he dated them February 23, 1996 and 14th November 2017 whereas he was only instructed by the Plaintiff in the year 2017. PW3 confirmed that he found that this property attracted Kshs. 150,000 only as the highest bid which was not accepted by the 1st Defendant hence the valuation was merely academic. Regarding the Valuation Report for Kisumu/Tamu/858, 959 & 824, PW3 similarly conceded that the same should have been dated November 14, 2017 when it was prepared and not 23rd February 1996. He admitted that all the photographs contained in this Report were taken in November 2017.

56. From the testimony of PW3 proved, it is clear that the valuation of the sold properties as alleged by the plaintiff was not conducted around the time the public auctions were held but in 2017 when the valuer was instructed by the plaintiff.

57. The 1st defendant testified that he was certain that a valuation report was prepared prior to the auctions but that no valuation reports were produced by the 1st Defendant due to the age of the matter as the allegation of undervaluation was only introduced several years after the event.

58. I am in agreement with the 1st defendant’s contention that PW3’s report did not speak to a valuation conducted around the time the impugned public auctions were held. Accordingly, I find that the valuation reports hold no probative value before this court on the alleged under valuation of the sold properties as alleged by the plaintiff.

59. The upshot of all the above is that the plaintiff failed to prove on a balance of probabilities that the 1st defendant unlawfully sold his properties. The plaintiff further failed to prove on a balance of probabilities that his properties were undervalued or that the interest charged was unconscionable or outside the contract between the plaintiff and the 1st defendant under the charge instruments.

Whether the court should grant special damages in the sum of Kshs 184,704,785. 03 as claimed by the plaintiff 60. Regarding the special damages, the law is quite clear on the head of damages called special damages. Special Damages must be both pleaded and proved, before they can be awarded by the Court. The decision of the Court of Appeal in Hahn v Singh, Civil Appeal No 42 of 1983 [1985] KLR 716, at pp 717, and 721 speaks to this principle on special damages. The learned judges of Appeal - Kneller, Nyarangi JJA, and Chesoni Ag JA – held that:“Special damages must not only be specifically claimed (pleaded) but also strictly proved…. for they are not the direct natural or probable consequence of the act complained of and may not be inferred from the act. The degree of certainty and particularity of proof required depends on the circumstances and nature of the acts themselves.”

61. In this case, the plaintiff’s claim under this head was based on the Audit Report prepared by PW2 who admitted that he used account statements prepared by the Plaintiff to demonstrate that the plaintiff’s properties had been sold at an undervalue and further admitted to not considering the interest rates stipulated under the Charge instruments.

62. PW2 also admitted that he based his calculation of the losses on the values taken from the Valuation Reports which he did not prepare nor was he capable of verifying. I have already faulted the valuation reports by PW3 and therefore I need not delve into the same again.

63. The 1st defendant pleaded in its amended defence that the claim for special damages was barred by section 19 of the Limitation of Actions Act, the same having been introduced more than 12 years after the cause of action arose. In his testimony, PW1 admitted to introducing these claims 24 years after the filing of the suit.

64. Sections 4 and 19 of the Limitation of Actions Act respectively require claims arising from contract to be brought within six years while claims for recovery of money arising from a mortgage are to be made within 12 years. Whichever way the Plaintiff’s claims for special damages are viewed, the same are statute barred and are for striking out. This is so because the Limitation of Actions Act provides that certain causes of action may not be brought after the expiry of a particular period of time. In other words, the Act bars the bringing of particular actions after the specified periods of limitation. The Act does not extinguish causes of action. In Rawal v Rawal [1990] KLR 275, Bosire, J (as he then was) stated:“The object of any limitation enactment is to prevent a plaintiff from prosecuting stale claims on the one hand, and on the other hand protect a defendant after he had lost evidence for his defence from being disturbed after along lapse of time. It is not to extinguish claims.”

65. The Rawal v Rawal decision cited with approval Dhanesvar v Mehta v Manilal M Shah [1965] EA 321 where it was stated that:“The object of any limitation enactment is to prevent a plaintiff from prosecuting stale claims on the one hand, and on the other hand to protect a defendant after he had lost the evidence for his defence from being disturbed after a long lapse of time. The effect of a limitation enactment is to remove remedies irrespective of the merits of the particular case.”

66. The same position was taken in Iga v Makerere University [1972] EA 65 where it was held that:“A plaint which is barred by limitation is a plaint “barred by law”. A reading of the provisions of sections 3 and 4 of the Limitation Act (Cap 70) together with Order 7 rule 6 of the Civil Procedure Rules seems clear that unless the appellant in this case had put himself within the limitation period by showing the grounds upon which he could claim exemption the court “shall reject” his claim...The Limitation Act does not extinguish a suit or action itself, but operates to bar the claim or remedy sought for, and when a suit is time-barred, the court cannot grant the remedy or relief.”

67. Therefore, as the Limitation of Actions Act does not extinguish a claim but only bars the bringing of the same, where the barrier is lifted by extension of time, the claim may still be sustained. The provision which provides for extension of time under the statute of limitations is section 27 of the Limitation of Actions Act, cap 22 Laws of Kenya which provides as follows:(1)Section 4 (2) does not afford a defence to an action founded on tort where -(a)the action is for damages for negligence, nuisance or breach of duty (whether the duty exists by virtue of a contract or of a written law or independently of a contract or written law); and(b)the damages claimed by the plaintiff for the negligence, nuisance or breach of duty consist of or include damages in respect of personal injuries of any person; and(c)the court has, whether before or after the commencement of the action, granted leave for the purposes of this section; and(d)the requirements of subsection (2) are fulfilled in relation to the cause of action.(2)The requirements of this subsection are fulfilled in relation to a cause of action if it is proved that material facts relating to that cause of action were or included facts of a decisive character which were at all times outside the knowledge (actual or constructive) of the plaintiff until a date which -(a)either was after the three-year period of limitation prescribed for that cause of action or was not earlier than one year before the end of that period; and(b)in either case, was a date not earlier than one year before the date on which the action was brought.(3)This section does not exclude or otherwise affect -(a)any defence which, in an action to which this section applies, may be available by virtue of any written law other than section 4 (2) (whether it is a written law imposing a period of limitation or not) or by virtue of any rule of law or equity; or(b)the operation of any law which, apart from this section, would enable such an action to be brought after the end of the period of three years from the date on which the cause of action accrued.

68. From the foregoing, extension of time only applies to claims made in tort and even in tort, the claims must be in respect of claims for personal injuries arising from negligence, nuisance or breach of duty whether the duty exists by virtue of a contract or of a written law or independently of a contract or written law.

69. In the circumstances of this case, it is clear that the plaintiff’s claim for special damages was extinguished and therefore barred by the statute of limitation. The claim for special damages thus fails.

Whether the court should order the 1st defendant to produce the accounts for examination by the court and parties 70. It was the plaintiff’s case that the court ought to order the 1st defendant to render an account as to how the claimed sum accrued as the defendant imposed excessive, unreasonable, punitive and unconscionable and unjustified interest rates that they had not agreed upon and further that the 1st defendant gave him conflicting statements of accounts.

71. On its part, the defendant contended that the interest rates applied to the loan balances were contractual having been expressly agreed upon in writing between the parties in the loan agreement.

72. The issue as to whether the concept of levying default/penalty interest is part of Bank trade usage and custom in Kenya is a fairly well beaten path. There are two schools of thought. One holds that it is and in the case of National Bank of Kenya Limited v Beth Ngonyo Ngengi & another [2012] eKLR the court stated that:“I have my own doubts on application of penalty interest for breach of commercial contracts. However, I am aware that it is a known trade usages and custom within the banking industry to charge penalty when a borrower defaults. In this case I need not rely on the implied terms as it was expressly provided for. In my understanding whether or not a charge applied is a ‘penalty’ in a Commercial Contract is a determination of the court notwithstanding the fact that the charge applied is styled penalty interest.”

73. Another school of thought is that the imposition of penalty interest/default rate is a contractual matter which must be expressly provided in a contract before it can be implemented. See for example the decision of Odunga J(as he then was) in Francis Joseph Kamau Ichacha v Housing Finance Company Limited [2014] eKLR wherein the learned judge expressed himself as follows:“Can it therefore be said that a practice in which the Banks unilaterally decide to load the customer’s account with penalties at their own discretion whose rates are only known to the Bank is such a certain practice that it can be said to amount to trade usage? In my view that would amount to stretching the word “certain” too far. For one to say that the penalty is certain not only ought there be certainty as to the levy of the interest but since the rate is not contained in any contractual document, the rate also must be certain and must be known in the market otherwise such levying of interest would violate the provisions of article 46(1)(b) of theConstitution. To argue otherwise would in my view open an avenue in which the right of redemption may easily be clogged or fettered. I would apply the same reasoning to the case of Maithya v Housing Finance Co of Kenya and Another [2003] 1 EA 133 and the other decisions which in any case are not binding on this Court.”

74. I am in agreement with Odunga J who stated in the case of Francis Joseph Kamau Ichatha v Housing Finance Company of Kenya Ltd [2014] eKLR thus at paragraph 66:“Can it therefore be said that a practice in which the Banks unilaterally decide to load the customer’s account with penalties at their own discretion whose rates are only known to the Bank is such a certain practice that it can be said to amount to trade usage? In my view that would amount to stretching the word “certain” too far. For one to say that the penalty is certain not only ought there be certainty as to the levy of the interest but since the rate is not contained in any contractual document, the rate also must be certain and must be known in the market otherwise such levying of interest would violate the provisions of Article 46(1)(b) of theConstitution. To argue otherwise would in my view open an avenue in which the right of redemption may easily be clogged or fettered. I would apply the same reasoning to the case of Maithya v Housing Finance Co of Kenya and Another [2003] 1 EA 133 and the other decisions which in any case are not binding on this Court.”

75. Taking into account the above two rival positions taken by the courts, I hold the view that if a Bank seeks to impose certain charges or interest, then it must make that intention clear in the contract that it enters into with the customer. There must be clarity on what the charges and interest are and how they are to be imposed. That said, it is a age-old principle of law that parties to a contract are bound by the terms and conditions thereof and that it is not the business of the Courts to rewrite such contracts. In National Bank of Kenya Ltd v Pipe Plastic Samkolit suprathe Court of Appeal at page 507 stated that:“A court of law cannot rewrite a contract between the parties as the parties are bound by the terms of their contract, unless coercion, fraud or undue influence are pleaded and proved.”

76. In the instant case, therefore, it follows that this court cannot be called upon to vary the terms of the loan agreement and charge between the parties on interest to be charged and resultant penalties upon default, in the absence of any evidence by the plaintiff of manifest error on the part of the 1st defendant. It was upon the plaintiff to proof that manifest error which he failed to do so.

77. I find and hold that the plaintiff has not proved on a balance of probabilities that he is entitled to the prayers sought that the 1st defendant be ordered to render an account and give statements showing how the accrued sum was arrived at.

Whether the court should grant temporary and permanent injunctions in favour of the plaintiff 78. The plaintiff sought both temporary and permanent injunctions against the 1st defendant. It is important to appreciate the wide distinction between the prohibitory injunction as envisaged in the “locus classicus” case of Giella v Cassman Brown (1973) EA and a mandatory injunction. In Shepard Homes v Sandham [1970] 3 WLR Megarry J (as he then was) stated follows:“Whereas a prohibitory injunction merely requires abstention from acting, a mandatory injunction requires the taking of positive steps, and may require the dismantling or destruction of something already erected, or constructed. This will result in a consequent waste of time, money and materials. If it is ultimately established that the Defendant was entitled to retain the erection”.

79. A permanent Injunction fully determines the rights of the Parties before the Court and is normally meant to perpetually restrain the commission of an act by the defendant in order for the rights of the Plaintiff to be protected. This court has the power to grant the permanent injunction under sections 1A, 3 & 3 A of the Civil Procedure Act if it is satisfied that the right of a Party has been infringed, violated and/or threatened as the court cannot just sit, wait and watch under these given circumstances.

80. The circumstances under which the court would grant a mandatory injunction was well stet out by the Court of Appeal in the Case of Malier Unissa Karim v Edward Oluoch Odumbe [2015] eKLR as follows:“The test for granting a Mandatory Injunction is different from that enunciated in the “Giella v Cassman Brown case which is the locus classicus case of Prohibitory Injunctions. The threshold in Mandatory is higher than the case of Prohibitory Injunction and the Court of Appeal in the case of “Kenya Breweries Ltd v Washington Okeyo [2002] EA 109” had the occasion to discuss and consider the principles that govern the grant of a Mandatory Injunction was correctly stated in Vol. 24 Halsbury Laws of England 4th Edition Paragraph 948 which states as follows:A Mandatory Injunction can be granted on an interlocutory application as well as at the hearing but in the absence of special circumstances, it will not normally be granted. However, it the case is clear and one which the Court thinks ought to be decided at once or if the act done is simple and summary one which can be easily remedied, or if the Defendant attempts to steal a match on the Plaintiff, a Mandatory Injunction will be granted on an Interlocutory application”.

81. The same Court of appeal in the case of Jay Super Power Cash and Carry Ltd v Nairobi City Council and 20 others CA 111/200 held that:“This Court has recognized and held in the past that it is the trespasser who should give way pending the determination of the dispute and it is no answer that the alleged acts of trespass are compensable in damages. A wrong doer cannot keep what he has taken balance he can pay for it.”

82. In the instant case, it is admitted by the plaintiff that he defaulted on the repayment of the loan advanced to him by the 1st defendant. It is common knowledge and sense that when one borrows money from another, that money will be paid back at a certain agreed time and on terms. In Joseph Okoth Waudi v National Bank of Kenya, Civil Application No 77 of 2004, the Court of Appeal in dismissing an appeal quoted from Halsbury’s Laws of England Vol 32, 4th Edition page 752, where it is stated that:“It is trite law that the court will not restrain a mortgagee from exercising its power of sale merely because the amount due is in dispute or because the mortgagor has begun a redemption action or because the mortgagor objects to the manner in which the sale is being arranged. It will be restrained however, if the mortgagor pays the amount claimed in court, that is, the amount which the mortgagee claims to be due to it unless on the terms of the mortgage, the claim is excessive.”

83. In the case of Francis JK Icatha v Holding Finance Co Ltd Kenya HCCC No 414 of 2004 the Court held that:“A Plaintiff should not be granted an injunction if he does not have clean hands, and no court of equity will aid a man to derive advantage from his own wrong, for the plaintiff seeks this court to protect him from the consequences of his own default. He who seeks equity must do equity. The plaintiff should not be protected or given advantage by virtue of his own refusal to make payments to the defendant/respondent a debt which he expressly undertook to pay”

84. In the circumstances, I am not persuaded that the plaintiff has demonstrated that he warrants a grant of the orders sought of permanent and temporary injunctions.

85. I must promptly point out that with regard to injunction applications, the law is relatively clear. The considerations as laid out in the case of Giella (supra) nearly one half of a century ago still hold sway. The claimant is expected to establish a prima facie case with a probability of success and not just an arguable one. He must then also show that he is likely to suffer irreparably if the injunction is denied and where, in doubt, the court is to apply the balance of convenience by ascertaining where the greater hardship would lie if the injunction was granted or denied: see Mrao Ltd v First American Bank of Kenya Ltd & others [2003] KLR 123.

86. I also hasten to add that the Court of Appeal in the Mrao case (supra) made it clear that when it comes to injunctions sought to restrain mortgagees and chargees from realizing their security, additional care and consideration of the circumstances of the transaction is very relevant with the focus being on whether the payment of the debt is being made and further that a dispute as to the amounts due was not good enough reason to halt the realization process even if the dispute had been occasioned by alleged illegal and contested interest.

87. Additionally, while the grant of temporary injunctions is intended to prevent the ends of justice from being abused: see Bonde v Steyn [2013] 2 EA 8, temporary injunctions are equitable remedies and the principles of equity will apply including the fact that the court will closely look at the conduct of the applicant.

88. I reiterate that in this case, the plaintiff has not met the conditions precedent for grant of the temporary injunction sought.

89. The upshot of the above is that this claim also fails.

Who should be awarded costs 90. Costs follow the event and to the successful party in litigation. They are however awarded in the sole discretion of the court. In Republic v Rosemary Wairimu Munene (Ex parte Applicant) v Ihururu Dairy Farmers Co-operative Society Ltd Judicial Review Application No 6 of 2004 it was held that the issue of costs is in the discretion of the court and is used to compensate the successful party for the trouble taken in prosecuting or defending the case and not to penalize the losing party. This position was adopted by the court in Cecilia Karuru Ngayu v Barclays Bank of Kenya &another [2016] eKLR whose import is that a successful party is entitled to costs unless he or she is guilty of any misconduct or there exist some other good reasons and or cause for not awarding costs to the successful party.

91. In this very old case, the decision coming after 29 years of the filing into court, the plaintiff failed to prove his case against the 1st defendant on a balance of probabilities. However, as costs are in the discretion of the court, I find that the plaintiff has in essence suffered for taking loans from the 1st defendant and even an attempt to introduce the 2nd defendant to aid him in settling the loans outstanding miserably failed. He seems not to have benefitted from the loans advanced by the 1st defendant. This is what I can call the ‘curse’ of the Bank loans. It is for this reason that I order that each party shall bear their own costs of this very old case.

92. This file is closed. I so order.

DATED, SIGNED AND DELIVERED AT KISUMU THIS 16TH DAY OF NOVEMBER, 2022RE ABURILIJUDGE