[2022] KEHC 15496 (KLR)

Wambugu v Northwave Credit Limited & 2 others (Civil Appeal E710 of 2021) [2022] KEHC 15496 (KLR) (Civ) (17 November 2022) (Ruling)

Neutral citation: [2022] KEHC 15496 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Civil

Civil Appeal E710 of 2021

CW Meoli, J

November 17, 2022

Between

Daniel Gichimu Wambugu

Applicant

and

Northwave Credit Limited

1st Respondent

Vetrank Investments Auctioneers

2nd Respondent

Nafaz David

3rd Respondent

Ruling

1. The motion dated November 3, 2021 by Daniel Gichimu Wambugu (hereafter the Applicant) seeks inter alia that Nafaz David (hereafter the 3rd Respondent), his agents, servants and any persons claiming under him be restrained from interfering with , selling and or transferring to a third party motor vehicle registration number KDC 627B pending the hearing and determination of this appeal; and that the court be pleased to give directions regarding the custody of motor vehicle registration number KDC 627B pending the hearing and determination of this appeal. The motion is expressed to be brought under Section 3A & 3B of the Civil Procedure Act (CPA), Order 43 and Order 51 Rule 1 the Civil Procedure Rules (CPR), inter alia, on the grounds on the face of the motion as amplified in the supporting affidavit sworn by the Applicant.

2. To the effect that being aggrieved and dissatisfied with the ruling of the lower court delivered in Nairobi MCCC No E8377 of 2021 on September 29, 2021 he has preferred an appeal and is apprehensive of losing motor vehicle registration number KDC 627B (hereafter the suit motor vehicle) an ambulance which is his source of income to the 3rd Respondent. He goes on to depose that on October 26, 2021 he conducted a search that confirmed the suit motor vehicle is registered in the name of the 3rd Respondent and unless the court intervenes, he is likely to lose the suit motor vehicle. He swears that the 3rd Respondent has been trading with the suit motor vehicle since his illegal purchase thereof, thus subjecting it to wear and tear and he may be unable to recoup lost earnings. Hence he contends that unless the court restrains the 3rd Respondent, his meritorious appeal may be rendered nugatory exposing him irreparable loss and damage.

3. Northwave Credit Limited (hereafter the 1st Respondent) opposes the motion through the replying affidavit of Peter Njagi dated March 14, 2022 who describes himself as a director of the 1st Respondent and also duly authorized by Vetrank Investments Auctioneers (hereafter the 2nd Respondent) to swear the affidavit. He deposes that the Applicant successfully applied for a loan facility with the 1st Respondent in the sum of Kshs 1,320,000/- which to finance the importation of the suit motor vehicle and that the vehicle was to be a security for the said facility. That when the facility became due and payable the Applicant failed and or neglected to honor his obligation resulting in the 1st Respondent exercising its right to realize the security.

4. He further states that the suit motor vehicle was subsequently attached and sold to the 3rd Respondent at a public auction held on May 10, 2021. The deponent contends that an injunction cannot issue against the 3rd Respondent, who is a third party in respect of the contract in dispute and an innocent purchaser for value. That the reliefs as sought for by the Applicant can only be granted once the substantive suit is heard and determined before the lower court. He concludes by deposing that the Applicant being in default has not approached the court with clean hands and the motion ought to be dismissed with costs.

5. The 3rd Respondent on his part opposes the application by way of a replying affidavit dated April 11, 2022. He deposes that he purchased the suit motor vehicle as the highest bidder at a public auction held on May 10, 2021; that the reliefs as sought by the Applicant are unreasonable and unjustifiable as he was a bonafide purchaser for value; and that an injunction cannot issue as against an innocent purchaser for value having acquired the suit motor vehicle at a public auction without knowledge of Applicant’s claim against the 1st Respondent over the suit motor vehicle. He concludes by asserting that he has a good title to the suit motor vehicle as such the instant motion and appeal ought to be dismissed.

6. In a rejoinder by way of a supplementary affidavit the Applicant takes issue with the 1st and 2nd Respondent affidavit material by asserting that the 1st Respondent caused him to hurriedly execute the credit facility documents and thereafter withheld all copies; that he had intentions to settle the loan facility but the 1st Respondent made it extremely difficult to do so; that despite demand by counsel to avail the loan facility agreement, the 1st Respondent declined to avail the same which prompting him to report the matter to police and thereafter institute the suit before the lower court; that after disbursement of the credit facility the suit motor vehicle remained illegally in the custody of the 1st Respondent hindering him from doing any business with it; and that upon the purported instructions to the 2nd Respondent to repossess the suit motor vehicle, he was shocked to learn on June 16, 2021 that the 1st Respondent had sold the suit motor vehicle to the 3rd Respondent. He contends that the 1st and 2nd Respondent colluded to deprive him of the suit motor vehicle through an illegal sale and therefore the 3rd Respondent cannot claim to be an innocent purchaser for value.

7. The Applicant further asserts that the 1st Respondent did not serve the notice of intention to sell, the proclamation notices or the deficiency notice showing the sale price of the suit motor vehicle. That the forced sale value of the suit motor vehicle demonstrates that there was collusion to deprive him of the same, compounded by the fact that the notice of public auction was published in a newspaper that has limited circulation. He deposes that the 1st Respondent is untrustworthy and unless the court intervenes there is a likelihood he will be deprived of his livelihood and yet the Respondents will not be able to reimburse the loss of earnings. He urges the court to order the unconditional release of the suit motor vehicle.

8. The motion was canvassed by way of written submissions. Counsel for the Applicant firstly submitted that there was no chattel agreement created with respect to the loan facility entered into between the Applicant and 1st Respondent. That upon execution of the credit facility the 1st Respondent ought to have disbursed the amount into the Applicant’s account but the 1st Respondent has failed to provide documentation showing that funds were disbursed for clearing the suit motor vehicle. Counsel asserted that the repossession of the suit motor vehicle without a court order was unlawful and not protected by the Movable Property Security Rights Act. Citing the provisions of Section 17(4), 17(5), 18(1) and 18(3) of the Auctioneers Act counsel contended that the 3rd Respondent was not a bona fide purchaser for value as the entire auction process, from advertising to the eventual sale of the suit motor vehicle was flawed. And that the 3rd Respondent failed to conduct due diligence was not an innocent purchaser for value.

9. On the sale of the suit motor vehicle, it was argued that while the 1st Respondent did not tender any proof that it was owed any money it had proceeded to auction the suit motor vehicle and to retain the proceeds of the sale. The Court of Appeal decision in Lawrence P Mukiri Mungai, Attorney of Francis Muroki Mwaura v Attorney General & 4 others [2017] eKLR was relied on to support the assertion that the 1st Respondent did not have good title to pass to the 3rd Respondent. Counsel further called to aid the decisions in Geilla v Cassman Brown (1973) EA 358 and Orawo & Another v Mistri & Others HCCC No 2776 of 1987 to contend that the Applicant has tendered sufficient material to warrant issuance of injunctive orders as an award of damages may not be adequate to compensate the Applicant. The court was urged to allow the motion with costs.

10. On behalf of the 1st and 2nd Respondent, counsel anchored his submissions on the decisions in Giella (supra) and Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] eKLR on the threshold to be met for granting an interlocutory injunction. Citing several decisions including John Nduati Kariuki t/a Johester Merchants v National Bank of Kenya Limited [2006] eKLR, and Kenya Commercial Finance Co Ltd v Afraha Education Society [2001] 1 EA on the three conditions for the grant of temporary conditions, counsel asserted that where an applicant fails to demonstrate a prima facie case the court ought not consider the other conditions. He asserted that the Applicant herein had neither an arguable case, nor stood to suffer any irreparable loss that cannot be compensated by damages. Moreover, that the balance of convenience tilts in favour of the 1st and 3rd Respondent because if an injunction is granted, they may not recover the money loaned to the Applicant through sale of the suit motor vehicle whose value depreciates with usage.

11. Defending the sale to the 3rd Respondent, counsel relied on Weston Gitonga & 10 Others v Peter Rugu Gikanga & Another [2017] eKLR and Anita Chelagat O’ Donovan & 2 Others v Fredrick Kwame Kumah & 2 Others [2015] eKLR to assert that the said Respondent is an innocent purchaser for value without notice. That the motor vehicle having been already sold, transferred and registered in the 3rd Respondent’s name, the application herein has been overtaken by events and granting the orders sought would be an exercise in futility. That the Applicant’s remedy lies in damages should the court find that the sale was illegal and un-procedural which issue can only be determined by the trial court.

12. Counsel further called to aid the decisions in Equip Agencies Limited v I & M Bank Limited [2017] eKLR,Geoffrey Njenga v Godfrey Karuri & Another [2000] eKLR and Argos Furnisher Limited v Ecobank Kenya Limited & Another [2014] eKLR to argue that the Applicant has not provided sufficient grounds to warrant interference with the 3rd Respondent’s custody of the suit motor vehicle, which must await final determination by the trial court. Citing the decision in Ibrahim Seikei t/a Masco Enterprises v Delphis Bank [2004] eKLR counsel finally asserted that parties are bound by the terms of an agreement willingly and knowingly executed. The court was urged to dismiss the motion with costs.

13. The 3rd Respondent submitted, relying on Katende v Haridar & Company Limited [2008] 2 EA 173 that the 3rd Respondent was an innocent purchaser for value without notice and that the question whether the sale of the suit motor vehicle ought to be nullified cannot be determined at this interlocutory stage but after hearing and final determination of the suit before the lower court. He reiterated that the 3rd Respondent acquired the suit motor vehicle through public auction and therefore was a bona fide purchaser. He urged that the motion ought to be dismissed with costs.

14. The Court has considered the rival affidavit material and submissions canvassed in respect of the motion. Some of the parties’ material ventured into the substantive appeal and or issues that are the preserve of the appellate court, while at this interlocutory stage, the court is not concerned with the merits of the appeal. The Applicant’s motion is expressed to be brought under Section 3A & 3B of the Civil Procedure Act (CPA) and Order 43 the Civil Procedure Rules (CPR). Evidently, the Applicant has invoked the wrong provisions of law, as the appropriate provisions based on the orders sought would be Order 42 Rule 6 (6) of the Civil Procedure Rules. The relevant part of Order 42 Rule 6 of the Civil Procedure Rules provides that: -(1)No appeal or second appeal shall operate as a stay of execution or proceedings under a decree or order appealed from except in so far as the court appealed from may order but, the court appealed from may for sufficient cause order stay of execution of such decree or order, and whether the application for such stay shall have been granted or refused by the court appealed from, the court to which such appeal is preferred shall be at liberty, on application being made, to consider such application and to make such order thereon as may to it seem just, and any person aggrieved by an order of stay made by the court from whose decision the appeal is preferred may apply to the appellate court to have such order set aside…(6)Notwithstanding anything contained in subrule (1) of this rule the High Court shall have power in the exercise of its appellate jurisdiction to grant a temporary injunction on such terms as it thinks just provided the procedure for instituting an appeal from a subordinate court or tribunal has been complied with.”

15. Visram J (as he then was), distilled the applicable principles guiding the grant of injunction pending appeal in Patricia Njeri & 3 Others v National Museum of Kenya [2004] eKLR. The learned Judge stated: -“The Appellants did, however, pray (in the alternative) for an order of injunction pending appeal. There was no dispute that the court can, in a proper case grant an injunction pending appeal. What are the principles that guide the court in dealing with such an application"In the Venture Capital case (Venture Capital and Credit Ltd v Consolidated Bank of Kenya Ltd Civil Application No Nairobi 349 of 2003 (UR)) the Court of Appeal said that an order for injunction pending appeal is a discretionary matter. The discretion must, however, be “exercised judicially and not in a whimsical or arbitrary fashion.” This discretion is guided by certain principles some of which are as follows:a)The discretion will be exercised against an Applicant whose appeal is frivolous (See Madhupaper International Limited v Kerr [1985] KLR 840 which cited Venture Capital). The Applicant must state that a reasonable argument can be put forward in support of his appeal (J K Industries v KCB (1982 – 88) KLR 1088 (also cited in Venture Capital)b)The discretion should be refused where it would inflict greater hardship that it would avoid (See Madhupaper supra).c)The Applicant must show that to refuse the injunction would render his appeal nugatory (See Butt v Rent Restriction Tribunal [1982] KLR 417 (cited also in Venture Capital).d)The Court should also be guided by the principles in Giella v Cassman Brown & Company Ltd [1973] EA 358 as set out in the case of Shitukha Mwamodo & Others (1986) KLR 445 (also cited in Venture Capital).” See also Mukoma v Abuoga [1988] KLR 645. ”

16. The court would propose to start with the well settled principles in Giella v Cassman Brown & Co Limited [1973] EA 358 as reiterated in Nguruman Limited v Jan Bonde Nielsen & 2 Others (2014) eKLR, the latter which is particularly illuminating as to the principles applicable to applications for interlocutory injunctions. The Court described the role of the judge in such application to be merely to consider whether the principles for the grant of the interlocutory injunction were met. The Court further observed that: -“...Since the fundamentals about the implications of the interlocutory orders of injunctions are settled, at least over four decades since Giella’s case, they could neither be questioned nor be elaborated in detailed research. Since those principles are already ...... by authoritative pronouncements in the precedents, they may be conveniently noted in brief as follows:In an interlocutory injunction application, the Appellants has to satisfy the triple requirements to:a)establish his case only at a prima facie levelb)demonstrate irreparable injury if a temporary injunction is not granted.c)allay any doubts as to (b) by showing that the balance of convenience is in his favor.”

17. The Court further stated that the three conditions apply separately as distinct and logical hurdles to be surmounted sequentially by an applicant. Such that, it is not enough for the Applicant to establish a prima facie case, they must further successfully establish irreparable injury, that is, injury for which damages recoverable at law would not be an adequate remedy. And where there is doubt as to the adequacy of damages, the court will consider the balance of convenience. Conversely, where no prima facie case is established, the court need not consider irreparable injury or balance of convenience. The Court of Appeal emphasized that the standard of proof is to prima facie standard.

18. Regarding the definition of a “prima facie case” the Court stated:“Recently, this court in Mrao Ltd v First American Bank of Kenya Ltd & 2 others [2003] KLR 125 fashioned a definition for “prima facie case” in civil cases in the following words:“In civil cases, a prima facie case is a case in which on the material presented to the court, a tribunal properly directing itself will conclude that there exists a right which has apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter. A prima facie case is more than an arguable case. It is not sufficient to raise issues but the evidence must show an infringement of a right, and the probability of success of the appellant’s case upon trial. That is clearly a standard, which is higher than an arguable case.We adopt that definition save to add the following conditions by way of explaining it. The party on whom the burden of proving a prima facie case lies must show a clear and unmistakable right to be protected which is directly threatened by an act sought to be restrained, the invasion of the right has to be material and substantive and there must be an urgent necessity to prevent the irreparable damage that may result from the invasion. We reiterate that in considering whether or not a prima facie case has been established, the court does not hold a mini trial and must not examine the merits of the case closely. All that the court is to see is that on the face of it the person applying for an injunction has a right which has been or is threatened with violation. Positions of the parties are not to be proved in such a manner as to give a final decision in discharging a prima facie case. The Appellants need not establish title it is enough if he can show that he has a fair and bona fide question to raise as to the existence of the right which he alleges. The standard of proof of that prima facie case is on a balance or, as otherwise put, on a preponderance of probabilities. This means no more than that the Court takes the view that on the face of it the appellant’s case is more likely than not to ultimately succeed."

19. Concerning the condition requiring the successful applicant to demonstrate a prima facie case which condition also ties in with the requirement on the applicant to demonstrate that he has an arguable appeal, it is not denied that the Applicant herein obtained a credit facility on March 1, 2021 with the 1st Respondent per his annexure “PN1” which loan was inclusive of interest, and became due on or before April 1, 2021. In the said document it evident that the Applicant duly executed every page of the loan facility signifying that he read and understood the terms and conditions therein. Under the loan facility agreement, the collateral for the loan was motor vehicle KDC 627B.

20. The Applicant’s contention was that the 1st Respondent never furnished him with a copy of the foregoing document, did not furnish proof of disbursement of the loan facility to his bank account as agreed or furnish the requisite documentation in respect of payment made to clear the suit motor vehicle necessitating the demand letter and police report -see annexures “DGW2” and “DGW3”- respectively, in the supplementary affidavit. The Applicant did not avail a bank statement for the said period between March 1, 2021 to April 1, 2021 to demonstrate his claims that no disbursements were made to his account. Indeed, if no loan disbursements were made, how did the Applicant procure the motor vehicle that he is claiming in this case, and which he complains was allegedly repossessed by the 1st Respondent?

21. However, on its part, the 1st Respondent asserted in its affidavit material that upon execution of the agreement, the loan disbursements were made directly to the receiving entities for the import and clearance of the suit motor vehicle. The key question here is whether the Plaintiff attempted to settle the loan facility pursuant to the terms and conditions of the agreement he duly executed on March 1, 2021, whether hurriedly or otherwise. There is no evidence in that regard coming from the Applicant even though it is clear from his material that he was the person claiming right to the use or possession of the suit vehicle at the time of filing suit. He therefore has not shown that he has fulfilled his end of the bargain under the agreement and that the 1st Respondent was not entitled to repossess and sell the vehicle as it did.

22. The court is not persuaded that the Applicant has not demonstrated a prima facie case as to the existence “of a right which has apparently been infringed by the opposite party to call for an explanation or rebuttal from the latter” (see Nguruman’s case). As earlier observed, this finding would equally apply to the question whether the Applicant has an arguable appeal which may be rendered nugatory if the orders sought are denied. In Stanley Kang’ethe Kinyanjui v Tony Keter & 5 Others [2013] eKLR that:“The first issue for our consideration is whether the intended appeal is arguable. This court has often stated that an arguable ground of appeal is not one which must succeed but it should be one which is not frivolous, a single arguable ground of appeal would suffice to meet the threshold that an intended appeal is arguable”.See also Denis Mogambi Mong’are v Attorney General & 3 Others Civil Appeal No Nairobi 265 of 2011 (UR 175/2011) where the same Court stated that:“An arguable appeal is not one that must necessarily succeed, it is simply one that is deserving of the court’s consideration.”

23. Besides, it appears to this court that if it were to be eventually found that the sale of the suit vehicle by the 1st Respondent was unlawful, damages would be quantifiable and adequate to compensate the Applicant. Thus, it is hard to see how the appeal would be rendered nugatory. In George Gathura Karanja v George Gathuru Thuo & 2 Others [2019] eKLR, the Court of Appeal stated that:“[A]n appeal/intended appeal is said to be rendered nugatory where the resulting effect is likely to be irreversible. See the case of Stanley Kang’ethe Kinyanjui versus Tony Ketter & 5 Others, Civil Appeal No 31 of 2012 where this Court stated inter alia thus:“Whether or not an appeal will be rendered nugatory depends on whether or not what is sought to be stayed if allowed to happen is irreversible, or if it is not reversible whether damages will reasonably compensate the aggrieved party.”

24. Similarly, it seems to me that granting the prayers sought would inflict more hardship than it would avoid. If the orders sought were granted, the value of the security would continue to depreciate with wear and tear over time, hence adversely affecting the rights of the 1st Respondent as a lender/vendor and the apparent innocent purchaser, the 3rd Respondent. The Court of Appeal in Madhupaper International Limited v Kerr [1985] KLR 840 held that: -“The Court of Appeal’s jurisdiction to grant an injunction pending an appeal is discretionary and is to be exercised judicially and not arbitrarily. It would be wrong to grant the injunction where the appeal is frivolous or where to grant it would inflict greater hardship than it would avoid. In this case, to grant an injunction pending appeal would be wrong as it would probably inflict greater hardship than it would avoid.”

25. In Charter House Investments Ltd v Simon K Sang & 3 Others (2010) eKLR, the Court of Appeal stated: -“Injunction is an equitable and discretionary remedy, given when the subject matter of the case before the Court requires protection and maintenance of the status quo. The award of a temporary injunction by Courts of equity has never been regarded as a matter of right even where irreparable injury is likely to result to the applicant. It is a matter of sound judicial discretion, in the exercise of which the Court balances the convenience of the parties and possible injuries to them and to third parties.”

26. Consequently, upon reviewing all the material placed before it, the court is not persuaded that this is a proper case for granting a temporary injunction pending appeal, and the motion dated November 3, 2021 is hereby dismissed with costs to the Respondents.

DELIVERED AND SIGNED ELECTRONICALLY AT NAIROBI ON THIS 17TH DAY OF NOVEMBER 2022C MEOLIJUDGEIn the presence of:Mrs Githaiga for the ApplicantMs Maina for the 1st and 2nd RespondentMs Maina h/b for Ms Gathere for the 3rd RespondentC/A: Carol