Virgin Hospital Limited v Family Bank Limited & 1 other

Reference Number LOC. 7/ICHAGAKI/3734 registered in the name of Kenneth Irungu Maguta, the director of the Appellant. 3. The second facility was a loan of Kenya Shillings Four Million Seven Hundred Thousand (Kshs. 4,700,000/=) advanced on 9th July 2021, also repayable over thirty-six (36) months in monthly instalments of Kshs. 158,581.57. This facility was secured by the same legal charge over L.R. No. LOC. 7/ICHAGAKI/3734, and further secured by Motor Vehicle Registration Number KDB 934J, a Mercedes Benz Actros, through a joint registration and registered movable securities agreement in the name of Kenneth Maguta Irungu. 4. The Appellant initially serviced both loan facilities in accordance with the agreed repayment schedules. However, in January and February 2022, the Appellant defaulted on the monthly instalments for both facilities. As a result of this default, the 1st Respondent instructed the 2nd Respondent to repossess the motor vehicle. 5. On 29th February 2022, the Appellant, through its director, made a payment of Kshs. 550,000/= towards clearing the arrears. On 2nd March 2022, the Appellant paid a further sum of Kshs. 30,000/= being auctioneer's fees as advised by the 1st Respondent's agent. The Appellant avers that it was instructed by the bank's agent to collect the motor vehicle from the 2nd Respondent, but upon attending the auctioneer's premises, the Appellant MRANG’A HCCA E036 OF 2024 -JUDGMENT 2

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was informed that no release letter had been received from the 1st Respondent and the vehicle could not be released. 6. On 3rd March 2022, the Appellant was served with a demand letter from the 1st Respondent claiming the sum of Kshs. 120,097,258.43/= arising from what the 1st Respondent termed as "illegal transactions" relating to Lipa na M-Pesa services. The Appellant maintains that it neither requested nor received any such facility and that the demand was therefore unjustified. 7. The Appellant further discovered that on or about 30th October 2021, the 1st Respondent had deducted a sum of Kshs. 6,368,577.57/= from the Appellant's account without prior notice or explanation. Upon inquiry, the Appellant was informed that this deduction related to the alleged Lipa na MPesa transactions. The Appellant contends that this deduction was unlawful and that had the funds not been deducted, the loan obligations would have been fully discharged. 8. Aggrieved by the 1st Respondent's refusal to release the motor vehicle and the demand for the substantial sum, the Appellant filed suit in the lower court on 18th March 2022 vide Murang'a CMCC No. E040 of 2022. By its plaint, the Appellant sought the following reliefs: (a) an order compelling the 1st Respondent to render a true, proper and accurate statement of accounts with regard to the alleged illegal transactions; (b) a permanent injunction restraining the Respondents from selling, transferring, or otherwise dealing MRANG’A HCCA E036 OF 2024 -JUDGMENT 3

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with Motor Vehicle Registration Number KDB 934J; (c) an order compelling the Respondents to unconditionally release the said motor vehicle; and (d) costs of the suit. 9. The 1st Respondent filed a statement of defence denying the allegations and maintaining that the Appellant was in default of its loan obligations. The 1st Respondent averred that the impugned deduction arose from Lipa na MPesa transactions that were separate and distinct from the loan facilities, and that the funds had been withheld pending the conclusion of criminal investigations. The 1st Respondent further maintained that it was entitled to exercise its statutory power of sale over the charged security. 10. The suit proceeded to full hearing before the Hon. M.E. Analo, Senior Resident Magistrate. The Appellant testified through its director, Kenneth Maguta Irungu (PW1), and the 1st Respondent called two witnesses, namely Wycliffe Mwangi (DW1) and another bank official (DW2). Both parties also tendered documentary evidence in support of their respective cases. 11. By a judgment delivered on 8th May 2024, the learned trial magistrate dismissed the Appellant's suit with costs to the 1st Respondent. The trial court found that the Appellant had failed to prove its case on a balance of probabilities. The court held that the Appellant was in default of its loan obligations and that the 1st Respondent was entitled to exercise its power of sale. The court further held that the issue of the deduction of Kshs. MRANG’A HCCA E036 OF 2024 -JUDGMENT 4

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6,368,577.57/= was separate and distinct from the loan obligations and could not excuse the Appellant from its contractual duty to service the loans. 12. Dissatisfied with the judgment of the lower court, the Appellant filed this appeal on 13th May 2024 by way of a memorandum of appeal containing ten (10) grounds of appeal. The gravamen of the appeal is that the learned trial magistrate misdirected himself in law and in fact by failing to properly evaluate the evidence on record, thereby arriving at an unjust decision. APPELLANT'S SUBMISSIONS 13. The Appellant was represented by Ms. Winnie Murira of M/s Murira Winnie & Co. Advocates, who filed written submissions dated 23rd January 2026. The Appellant condensed the ten grounds of appeal into three issues for determination. 14. The Appellant's first issue is whether the learned magistrate properly evaluated the evidence on record. It is submitted that the learned magistrate totally disregarded the Appellant's evidence and failed to appreciate the weight of the evidence presented. The Appellant contends that it demonstrated its case on a balance of probabilities by establishing the existence of the banking relationship, the unlawful deduction from its account, and the wrongful repossession of the motor vehicle. It is argued that MRANG’A HCCA E036 OF 2024 -JUDGMENT 5

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the learned magistrate failed to consider the evidence of PW1 and the documentary evidence tendered by the Appellant, and instead accepted the 1st Respondent's version without critical scrutiny. In support of its submissions on the duty of the first appellate court, the Appellant cites Githaiga v Mwangi (Civil Appeal E064 of 2022) [2024], Section 107 of the Evidence Act (Cap. 80, Laws of Kenya) on the burden of proof, and Section 112 of the Evidence Act on the shifting of the evidential burden. 15. The Appellant's second issue concerns whether the learned magistrate erred in law and fact by failing to properly consider the legality and effect of the deduction of Kshs. 6,368,577.57/= from the Appellant's account. The Appellant submits that this deduction was made without notice, consent, or any lawful justification. It is contended that the existence of this unexplained deduction cast a duty upon the 1st Respondent to justify it, which duty it failed to discharge. The Appellant argues that had this sum not been deducted, the entire loan amount would have been cleared without any interest accruing. It is further submitted that the 1st Respondent's explanation that the deduction related to Lipa na M-Pesa transactions was insufficient and unconvincing, and that the trial court ought to have directed the 1st Respondent to render a proper account. In support of its submission on the shifting of the evidential burden, the Appellant cites Section 112 of the Evidence Act (Cap. 80, Laws of Kenya), which provides that where any fact is especially within the knowledge of any party to civil proceedings, the MRANG’A HCCA E036 OF 2024 -JUDGMENT 6

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burden of proving or disproving that fact is upon him. It is contended that the 1st Respondent, having made the deduction from the Appellant's account, was under a duty to explain and justify it, which duty it failed to discharge. 16. The Appellant's third issue is whether the repossession and intended sale of Motor Vehicle Registration Number KDB 934J was lawful in the circumstances. The Appellant submits that the repossession was premature, oppressive, and unlawful. It is contended that the Appellant had cleared the arrears including the auctioneer's fees, and that the refusal to release the vehicle was therefore unjustified. The Appellant further argues that the 1st Respondent's claim of Kshs. 120,097,258.43/= was absurd and unsubstantiated, and that the repossession based on such a claim was a denial of natural justice. The Appellant prays that this appeal be allowed, the judgment of the lower court be set aside, and judgment be entered in its favour as per the reliefs sought in the plaint, together with costs of this appeal and in the lower court. The Appellant relies on the decision in Nahashon Njage Nyaggah v Savings & Loan Kenya Limited & another [2017] eKLR, where the court held that a bank is obligated to keep proper accounts and entries, and that where the bank's accounts are so carelessly and unprofessionally kept that it is difficult to ascertain what amount has been paid and what is outstanding, the court will give the benefit of the doubt to the customer. It is submitted that the 1st Respondent's failure to render proper accounts, coupled with the unlawful deduction and the MRANG’A HCCA E036 OF 2024 -JUDGMENT 7

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subsequent demand for Kshs. 120,097,258.43/=, renders the repossession unlawful. RESPONDENT'S SUBMISSIONS 17. The 1st Respondent was represented by Ms. Lilian Tuitoek of M/s Maina & Onsare Partners Advocates LLP, who filed written submissions dated 6th February 2026. determination, The which 1st Respondent substantially also mirror framed those three issues propounded by for the Appellant. 18. On the duty of the appellate court, the 1st Respondent submits that this being a first appeal, this court is duty-bound to re-evaluate and reassess the evidence on record and draw its own conclusions. However, it is contended that such evaluation must be strictly confined to the record of appeal and the evidence presented before the trial court. The 1st Respondent cites Abok James Odera T/A A.J. Odera & Associates v John Patrick Machira T/A Machira & Co. Advocates [2013] eKLR in support of the proposition that the trial court's findings ought to be upheld unless they are plainly erroneous. It is further submitted that the Appellant cannot introduce matters outside the record or re-litigate the case as though it were at first instance. MRANG’A HCCA E036 OF 2024 -JUDGMENT 8

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19. On the issue of the deduction of Kshs. 6,368,577.57/=, the 1st Respondent submits that the trial court correctly found that this issue was separate and distinct from the loan facilities. It is contended that the impugned deduction arose from Lipa na M-Pesa transactions that were wholly unrelated to the loan facilities. The 1st Respondent's witness, Mr. Wycliffe Mwangi, explained that the Appellant's till number had become dormant and was subsequently recycled, and that the sums deposited into the Appellant's account did not belong to the Appellant. The funds were therefore withheld pending the conclusion of criminal investigations. The 1st Respondent further points out that the Appellant's director admitted during cross-examination that he had been summoned by the DCIO in connection with these transactions. It is submitted that the loan facility is governed by an independent contractual arrangement with defined repayment obligations, and that the existence of disputed funds in the Appellant's current account could not in law or in fact be applied towards the loan. The 1st Respondent cites Bingwa Sacco Society Limited v Ngatia (Civil Appeal E318 of 2023) [2024] KEHC 8748 (KLR) on the applicable standard of proof on a balance of probabilities in civil cases, and Kinyanjui v Njoki (Civil Appeal 298 of 2023) [2024] KEHC 9725 (KLR) for the proposition that a court cannot act in a vacuum where a party has not sought specific relief. The 1st Respondent also relies on Jasbir Singh Rai & Others v Tarlochan Rai & Others [2014] eKLR and Kenya Power & Lighting Company Limited v MRANG’A HCCA E036 OF 2024 -JUDGMENT 9

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Habib (Civil Appeal 24 of 2016) [2018] KEHC 5027 (KLR) on the proper approach to evaluation of evidence by the trial court. 20. On the lawfulness of the repossession, the 1st Respondent submits that the trial court correctly found that the Appellant was in default and that the 1st Respondent was entitled to exercise its power of sale. It is contended that the payments made by the Appellant in March 2022 did not entirely settle the outstanding amounts, interest, and penalties. The 1st Respondent maintains that the motor vehicle was charged as security for the loan of Kshs. 4,700,000/=, and that upon default, the 1st Respondent was lawfully entitled to instruct the 2nd Respondent to repossess the vehicle. The 1st Respondent prays that this appeal be dismissed with costs. DUTY OF THE APPELLATE COURT 21. Before delving into the merits of this appeal, it is necessary to restate the well-settled principles governing the duty of a first appellate court. Section 78 of the Civil Procedure Act (Cap. 21, Laws of Kenya) provides that an appeal shall be by way of rehearing. The principles have been crystallised in a long line of authorities, and it is sufficient for present purposes to restate the following. 22. First, the first appellate court is under a duty to reconsider and reevaluate the evidence which was adduced in the lower court, both on points MRANG’A HCCA E036 OF 2024 -JUDGMENT 10

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of law and fact, and come to its own conclusions. This principle was enunciated by the Court of Appeal for Eastern Africa in the celebrated case of Selle and Another v Associated Motor Boat Company Ltd and Others [1968] EA 123 at page 126, where the court held that: "this court must reconsider the evidence, evaluate it itself and draw its own conclusions though it should always bear in mind [the fact] 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 judge's findings of fact if it appears that he has clearly failed on some point to take account of particular circumstances or probabilities materially to estimate the evidence." This passage has been cited and followed in countless subsequent decisions and remains the locus classicus on the subject. 23. These principles have been reiterated in more recent decisions of the courts in Kenya. In Abok James Odera T/A A.J. Odera & Associates v John Patrick Machira T/A Machira & Co. Advocates [2013] eKLR, the Court of Appeal stated that on a first appeal, the court has a duty to reevaluate, re-assess and reanalyze the extracts on the record and then determine whether the conclusions reached by the learned trial judge are to stand or not. The Court further held, citing Kenya Ports Authority v Kusthon (Kenya) Limited (2002) 2 EA 212, that the appellate court should always bear in mind that it has neither seen nor heard the witnesses and should make due allowance in that respect, and that the responsibility of MRANG’A HCCA E036 OF 2024 -JUDGMENT 11

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the court is to rule on the evidence on record and not to introduce extraneous matters not dealt with by the parties in the evidence. Similarly, in Githaiga v Mwangi (Civil Appeal E064 of 2022) [2024], the court reiterated that the first appellate court is under a duty to re-evaluate and assess the evidence and make its own conclusions, while keeping at the back of its mind that the trial court had the advantage of observing the demeanour of the witnesses and hearing their evidence first hand. 24. Second, in reconsidering and re-evaluating the evidence, the appellate court must bear in mind and give due allowance for the fact that the trial court had the advantage of seeing and hearing the witnesses testify. As Oder JA (as he then was) observed in Peters v Sunday Post Limited [1958] EA 424 at page 429, "it is a strong thing for an appellate court to differ from the findings on a question of fact of the judge who had the advantage of seeing and hearing the witnesses... But the jurisdiction to review the evidence should be exercised with caution: it is not enough that the appellate court might have come to a different conclusion." The rationale for this principle is that the trial judge has the opportunity to observe the demeanour of witnesses, assess their credibility, and form impressions that cannot be gleaned from the cold record on appeal. 25. Third, the appellate court may only interfere with the findings of fact made by the trial court where those findings are plainly erroneous, or where the trial court has misdirected itself on a matter of law or fact, or where the MRANG’A HCCA E036 OF 2024 -JUDGMENT 12

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trial court has failed to take into account material considerations, or where the findings are inconsistent with the evidence. As stated in Mbogo and Another v Shah [1968] EA 93, the Court of Appeal will not interfere with the exercise of discretion by an inferior court unless it is satisfied that the decision is clearly wrong because it has misdirected itself or because it has acted on matters on which it should not have acted or because it failed to take into consideration matters which it should have taken into consideration." 26. Applying these principles to the present appeal, I am mindful that I must subject the entire record to fresh scrutiny, evaluate the evidence afresh, and draw my own independent conclusions, while bearing in mind that I neither saw nor heard the witnesses testify. I now turn to the substantive issues for determination. ISSUES FOR DETERMINATION 27. Having carefully considered the record of appeal, the written submissions of both parties, and the authorities cited, I have distilled the following four issues for determination: Issue 1: Whether the learned trial magistrate properly evaluated the evidence on record before arriving at the decision to dismiss the Appellant's suit. MRANG’A HCCA E036 OF 2024 -JUDGMENT 13

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Issue 2: Whether the learned trial magistrate erred in law and in fact by failing to consider the legality and effect of the deduction of Kshs. 6,368,577.57/= from the Appellant's account by the 1st Respondent. Issue 3: Whether the repossession and intended sale of Motor Vehicle Registration Number KDB 934J by the 1st Respondent, through the 2nd Respondent, was lawful in the circumstances of this case. Issue 4: What consequential orders ought to issue having regard to the determinations on the foregoing issues? ANALYSIS AND DETERMINATION Issue 1: Whether the Learned Trial Magistrate Properly Evaluated the Evidence 28. The applicable legal principles governing the evaluation of evidence by a trial court are well established. Section 107 of the Evidence Act (Cap. 80, Laws of Kenya) places the burden of proof in civil cases on the party who asserts the existence of a fact. That section provides that whoever desires any court to give judgment as to any legal right or liability dependent MRANG’A HCCA E036 OF 2024 -JUDGMENT 14

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on the existence of facts which he asserts must prove that those facts exist. The standard of proof in civil cases is on a balance of probabilities, which means that the party bearing the burden must establish that the existence of the fact asserted is more probable than not. 29. In the case of Miller v Minister of Pensions [1947] 2 All ER 372, Denning J (as he then was) famously described the standard of proof in civil cases as follows: "If the evidence is such that the tribunal can say: we think it more probable than not, the burden is discharged, but, if the probabilities are equal, it is not." This standard has been consistently applied by Kenyan courts. The 1st Respondent has cited Bingwa Sacco Society Limited v Ngatia (Civil Appeal E318 of 2023) [2024] KEHC 8748 (KLR) in support of the proposition that the standard of proof in civil cases is on a balance of probabilities. While I agree with this principle, it must be borne in mind that the standard cuts both ways; it applies equally to the Appellant's burden of proving its case and to the 1st Respondent's burden of justifying the impugned deduction. 30. In Mrao Ltd v First American Bank of Kenya Ltd & 2 Others [2003] KLR 125, the Court of Appeal emphasised that a prima facie case in civil proceedings is one 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 so as to call for an explanation or rebuttal from the latter. This principle is directly relevant to MRANG’A HCCA E036 OF 2024 -JUDGMENT 15

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the present case, where the Appellant bore the burden of establishing that the 1st Respondent had breached its contractual obligations and that the repossession of the motor vehicle was unlawful. 31. Applying these principles to the facts of this case, the learned trial magistrate was required to carefully evaluate the evidence tendered by both parties, assess the credibility of the witnesses, and determine whether the Appellant had discharged the burden of proof resting upon it. The record reveals that the Appellant testified through its director, Kenneth Maguta Irungu (PW1), who adopted his witness statement and produced documentary evidence including the letter of offer dated 24th May 2021, bank receipts, loan schedules, the demand letter dated 3rd March 2022, and the notification of sale. The 1st Respondent called Wycliffe Mwangi (DW1), a bank official, who also adopted his witness statement and produced the letters of offer for both facilities, bank statements for both loan accounts, and the registered movable securities agreement. 32. The learned trial magistrate considered this evidence and concluded that the Appellant had failed to prove its case on a balance of probabilities. The court found that the Appellant was in default of its loan obligations, that the 1st Respondent had lawfully exercised its power of sale, and that the issue of the deduction of Kshs. 6,368,577.57/= was separate and distinct from the loan obligations. Having carefully reviewed the record, I am satisfied that the learned trial magistrate did evaluate the evidence before the court. The MRANG’A HCCA E036 OF 2024 -JUDGMENT 16

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court considered the testimony of PW1 and DW1, the documentary evidence, and the submissions of both parties. The court's findings were based on the evidence on record and were not plainly erroneous. 33. However, a critical question arises as to whether the learned trial magistrate gave adequate consideration to the issue of the deduction of Kshs. 6,368,577.57/= and its potential impact on the loan accounts. The trial court dismissed this issue as being separate and distinct from the loan obligations without adequately interrogating whether the 1st Respondent had discharged its duty to account for the deduction. This is an aspect that requires closer scrutiny and I will address it under Issue 2 below. Subject to this reservation, I find that the learned trial magistrate did evaluate the evidence, and his overall assessment of the credibility of the witnesses and the documentary evidence cannot be said to be plainly erroneous. I therefore answer Issue 1 in the affirmative, subject to the qualification relating to the deduction issue. Issue 2: Whether the Learned Trial Magistrate Erred in Failing to Consider the Deduction of Kshs. 6,368,577.57/= 34. This issue lies at the heart of the present appeal and requires a careful examination of the banking relationship between the parties, the nature of the impugned deduction, and the legal obligations of a bank towards its customer. MRANG’A HCCA E036 OF 2024 -JUDGMENT 17

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35. The relationship between a bank and its customer is fundamentally contractual in nature. It is a relationship of debtor and creditor in respect of the customer's account, coupled with fiduciary obligations that arise from the position of trust that the customer reposes in the bank. As was observed by Atkin LJ in Joachimson v Swiss Bank Corporation [1921] 3 KB 110 , the bank undertakes to receive money and to collect bills for its customer's account, and to honour the customer's cheques drawn upon it. The bank is under a duty to act in good faith and with reasonable care and skill in the conduct of the customer's affairs. 36. In the Kenyan context, the Banking Act (Cap. 488, Laws of Kenya) provides the regulatory framework within which banking institutions must operate. Section 2 of the Banking Act defines a banking business as the business of receiving moneys on current account, deposit account, savings account, or other similar account. The Act imposes various obligations on banks, including the duty to maintain proper records and to deal with customer funds in accordance with the terms of the banking contract and applicable law. 37. The Court of Appeal has had occasion to consider the duties of banks towards their customers in several decisions. In National Bank of Kenya Ltd v Pipeplastic Samkolit (K) Ltd [2001] eKLR, the Court of Appeal stated as follows: "A court of law cannot rewrite a contract between parties. The parties are bound by the terms of their contract, unless coercion, fraud MRANG’A HCCA E036 OF 2024 -JUDGMENT 18

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or undue influence are pleaded and proved." This principle underscores the sanctity of contractual obligations in banking relationships, but it also implies that banks must act within the confines of the law and the contractual terms in their dealings with customers. 38. In Barclays Bank of Kenya Ltd v Kepha Nyabera & 191 Others [2013] eKLR, the Court of Appeal emphasised that a creditor who holds an array of security is not duty bound to take one particular line first. The court held that a creditor has a free hand as to when to act and on which security, without any direction by the debtor, sureties, or the court, unless parties have expressly agreed to the contrary. While this principle relates to the exercise of security rights, it does not absolve a bank from its duty to account to its customer for moneys deducted from the customer's account. 39. The evidence on record reveals that on or about 30th October 2021, the 1st Respondent deducted a sum of Kshs. 6,368,577.57/= from the Appellant's account. This deduction was made without prior notice to the Appellant. The 1st Respondent's explanation, as tendered through DW1, was that the deduction related to Lipa na M-Pesa transactions and that the Appellant's till number had become dormant and was subsequently recycled. The 1st Respondent further stated that the sums deposited into the Appellant's account did not belong to the Appellant and that the funds were being held pending the conclusion of criminal investigations. MRANG’A HCCA E036 OF 2024 -JUDGMENT 19

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40. Several observations must be made about this explanation. First, the 1st Respondent did not produce any documentary evidence to substantiate the claim that the funds were proceeds of illegal transactions. No police report, charge sheet, or any other official document was tendered to support the assertion that criminal investigations were ongoing. Second, the 1st Respondent did not explain why the entire sum of Kshs. 6,368,577.57/= was deducted without any breakdown or itemisation. Third, the 1st Respondent did not explain why, if the funds were being held pending investigations, the Appellant was subsequently demanded to pay Kshs. 120,097,258.43/= in respect of the same Lipa na M-Pesa transactions. The relationship between the deduction and the subsequent demand is unclear and was not adequately explained by the 1st Respondent. 41. The learned trial magistrate, in dismissing this issue, stated that the issue of the deduction and the issue of the loan default were "quite separate and distinct and could not discharge the plaintiff from their contractual duty of servicing the loan they had taken." While there is merit in the observation that the loan obligations and the current account transactions are governed by distinct contractual arrangements, this does not absolve the trial court from the duty to interrogate the lawfulness of the deduction. A bank cannot unilaterally deduct substantial sums from a customer's account without proper justification and expect the courts to rubber-stamp such action simply because the customer is in default of a separate loan facility. MRANG’A HCCA E036 OF 2024 -JUDGMENT 20

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42. The 1st Respondent owed the Appellant a duty of care and a duty to act in good faith in the management of the Appellant's account. This duty includes the obligation to provide a true, proper, and accurate statement of account when requested to do so. The Appellant's request for an account statement was not an idle demand; it was a legitimate attempt to understand the basis for the deduction and the subsequent demand for Kshs. 120,097,258.43/=. The 1st Respondent's failure to provide a satisfactory explanation, coupled with its insistence on the loan default as a basis for repossession, suggests an attempt to conflate separate issues to the detriment of the Appellant. The Appellant invoked Section 112 of the Evidence Act (Cap. 80, Laws of Kenya), which provides that in civil proceedings, when any fact is especially within the knowledge of any party to those proceedings, the burden of proving or disproving that fact is upon him. The deduction of Kshs. 6,368,577.57/= was a fact especially within the knowledge of the 1st Respondent, and the evidential burden therefore shifted to the 1st Respondent to justify the deduction. This burden was not satisfactorily discharged. The Appellant further relied on Nahashon Njage Nyaggah v Savings & Loan Kenya Limited & another [2017] eKLR , where the court held that a bank is obligated to keep proper accounts and entries, and that it is the bank that is obligated to provide proper accounts. Where the bank's accounts are so carelessly and unprofessionally kept that it is difficult to ascertain what amount has been paid and what is outstanding, MRANG’A HCCA E036 OF 2024 -JUDGMENT 21

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the court will give the benefit of the doubt to the customer. In the present case, the 1st Respondent's failure to provide a proper and verifiable statement of account, and the admission by the 1st Respondent's own witness, DW2, during cross-examination that the 1st Respondent did not have an audit for the account, further undermines the 1st Respondent's position. The 1st Respondent also cited Kinyanjui v Njoki (Civil Appeal 298 of 2023) [2024] KEHC 9725 (KLR) for the proposition that a trial court cannot be expected to act in a vacuum. While I accept this principle, it does not assist the 1st Respondent in this case. The Appellant did seek specific relief, namely an order for the 1st Respondent to render a proper statement of accounts and the release of the motor vehicle. The trial court was not, therefore, acting in a vacuum; it had before it a clear prayer for accounts, which it erroneously declined to grant. 43. I therefore find that the learned trial magistrate erred in failing to give adequate consideration to the issue of the deduction of Kshs. 6,368,577.57/=. While I do not find that the Appellant has established on the evidence before me that the deduction was unlawful in the sense of being fraudulent or malicious, I do find that the 1st Respondent has not satisfactorily explained the basis for the deduction. The 1st Respondent, as the party that made the deduction, bore the burden of justifying it. The explanation tendered was vague, unsupported by documentary evidence, and raised more questions than it answered. I answer Issue 2 by finding that MRANG’A HCCA E036 OF 2024 -JUDGMENT 22

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the learned trial magistrate did err in failing to properly interrogate this issue, and that the 1st Respondent has not discharged the burden of justifying the deduction. Issue 3: Whether the Repossession and Intended Sale was Lawful 44. The lawfulness of the repossession and intended sale of the motor vehicle depends on whether the 1st Respondent had a valid and enforceable right to exercise its power of sale under the security agreement, and whether the procedural requirements for such exercise were complied with. 45. The statutory framework governing the exercise of a chargee's power of sale is found in the Land Act, No. 6 of 2012 (for land) and the Hire Purchase Act (Cap. 507, Laws of Kenya) and the Chattels Transfer Act (Cap. 28, Laws of Kenya) for movable property. For motor vehicles charged as security, the registration of a lien or charge under the Transport Licensing Act and the relevant provisions of the Traffic Act (Cap. 403, Laws of Kenya) may also be relevant. However, the primary basis for the 1st Respondent's power of sale in this case is the registered movable securities agreement executed between the parties. In addition, the Auctioneers Act (Cap. 526, Laws of Kenya) is directly relevant to the conduct of the 2nd Respondent in this matter. Section 2(2)(e) of the Auctioneers Act defines the carrying on of the business of an auctioneer to include a person who repossesses goods from any person pursuant to the MRANG’A HCCA E036 OF 2024 -JUDGMENT 23

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provisions of any written law or contract. The 2nd Respondent, being a firm of auctioneers duly registered under the Act, falls squarely within this definition. Section 26 of the Auctioneers Act provides that a person who suffers any special or general damages by the unlawful or improper exercise of any power by a licensed auctioneer shall be entitled to recover any damages directly suffered by him from the auctioneer by action. This provision creates a statutory right of action against an auctioneer who acts unlawfully or improperly in the exercise of his powers. Section 21 of the Auctioneers Act further requires that the date, time and place of every sale by auction shall be advertised in the prescribed manner, and that such sale shall take place on the date, at the time and at the place so advertised. These statutory provisions impose a duty on the 2nd Respondent to act lawfully and in accordance with the prescribed procedures when carrying out a repossession or conducting a sale by auction. 46. In Wesley Kibagendi Jason v ECO Bank Ltd & Another [2020] eKLR, the High Court considered the circumstances under which a chargee may exercise its power of sale. The court held that a chargee's statutory power of sale arises once there is a debt which remains outstanding despite demand. The court further held that it is upon the chargor to prove that there is in fact no debt due to the chargee before the power of sale can be restrained. This principle was applied by the learned trial magistrate in the present case. MRANG’A HCCA E036 OF 2024 -JUDGMENT 24

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47. However, the exercise of the power of sale is not absolute. In Basil Criticos v National Bank of Kenya Limited (Civil Appeal No. 80 of 2017) [2022] KECA 552 (KLR), the Court of Appeal awarded substantial damages to the plaintiff where the bank had improperly exercised its statutory power of sale. The court found that the sale was unauthorized, improper, and irregular, violating the legal procedure under the Land Act, 2012. While that case involved land, the underlying principle - that a chargee must act lawfully and in accordance with due process when exercising its power of sale - applies with equal force to movable property. The 1st Respondent also cited Jasbir Singh Rai & Others v Tarlochan Rai & Others [2014] eKLR in its submissions on this issue. While that case primarily concerned the approach of a first appellate court to concurrent findings of fact by two courts below, the underlying principle that an appellate court should not lightly overturn findings of fact is well taken. However, as I have already found above, the trial court in this case failed to properly interrogate the issue of the deduction of Kshs. 6,368,577.57/= and its relationship to the exercise of the power of sale. This is not a case of the appellate court simply disagreeing with the trial court's assessment of the evidence; rather, it is a case where the trial court failed to consider a material issue that went to the heart of the lawfulness of the repossession. I am therefore satisfied that interference with the trial court's findings is warranted in the circumstances of this case. MRANG’A HCCA E036 OF 2024 -JUDGMENT 25

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48. In the present case, the 1st Respondent contends that the Appellant was in default of the loan of Kshs. 4,700,000/= secured by the motor vehicle, and that the power of sale had therefore accrued. The documentary evidence, including the bank statements, confirms that the Appellant defaulted on the monthly instalments for January and February 2022. The Appellant does not seriously dispute this default. The question, however, is whether the default justified the repossession in the circumstances prevailing at the time. 49. The evidence reveals that on 29th February 2022, the Appellant made a payment of Kshs. 550,000/= towards clearing the arrears. On 2nd March 2022, the Appellant paid a further Kshs. 30,000/= as auctioneer's fees. These payments were accepted by the 1st Respondent's agent, who instructed the Appellant to collect the vehicle from the auctioneer. However, the release letter was never sent. Instead, on 3rd March 2022, the Appellant was served with a demand letter claiming Kshs. 120,097,258.43/=, and the motor vehicle was not released. 50. In my view, the conduct of the 1st Respondent raises serious concerns. Having accepted the Appellant's payment towards clearing the arrears and instructed the Appellant to collect the vehicle, the 1st Respondent's subsequent refusal to release the vehicle on the basis of a fresh and unsubstantiated demand of Kshs. 120,097,258.43/= smacks of bad faith (mala fides). The 1st Respondent cannot, on the one hand, accept payments towards clearing the loan arrears and, on the other hand, refuse to release MRANG’A HCCA E036 OF 2024 -JUDGMENT 26

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the security on the basis of an unrelated and disputed claim. The two matters - the loan default and the Lipa na M-Pesa transactions - ought to have been dealt with separately and transparently. The 1st Respondent had cited Kenya Power & Lighting Company Limited v Habib (Civil Appeal 24 of 2016) [2018] KEHC 5027 (KLR) in its submissions on the duty of the first appellate court to confine itself to the record. I have done so, and it is precisely on the basis of the evidence on record that I find the 1st Respondent's conduct to be wanting. 51. Furthermore, the power of sale must be exercised bona fide and for the purpose of recovering the secured debt. Where, as in this case, the chargee has conflated unrelated claims and has refused to release the security despite the chargor having cleared the arrears, the chargee's conduct ceases to be a legitimate exercise of contractual rights and becomes an oppressive abuse of its position. The 1st Respondent's failure to provide a proper statement of accounts, its unsubstantiated demand for Kshs. 120,097,258.43/=, and its refusal to release the vehicle after accepting payments towards the arrears, all point to a breach of the duty of good faith owed to the Appellant. 52. I therefore find that the repossession and intended sale of the motor vehicle, in the specific circumstances of this case, was not lawful. The 1st Respondent abused its position by conflating unrelated claims and by failing to act in good faith towards the Appellant. I answer Issue 3 in the negative. MRANG’A HCCA E036 OF 2024 -JUDGMENT 27

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Issue 4: Consequential Orders 53. Having found in favour of the Appellant on Issues 2 and 3, the question arises as to the appropriate orders to issue. The Appellant seeks the release of the motor vehicle, an order compelling the 1st Respondent to render a proper statement of accounts, and costs. I consider these prayers in turn. 54. As regards the release of the motor vehicle, I have found that the repossession was unlawful in the circumstances. The Appellant is therefore entitled to an order directing the Respondents to release Motor Vehicle Registration Number KDB 934J, Mercedes Benz Actros, to the Appellant forthwith. However, this release is without prejudice to the 1st Respondent's right to pursue the outstanding loan amounts through lawful means, provided that the 1st Respondent renders a proper and accurate statement of account. 55. As regards the prayer for an order compelling the 1st Respondent to render a true, proper, and accurate statement of accounts, I find that this prayer is meritorious. The 1st Respondent has a contractual and statutory duty to maintain proper records and to provide statements of account to its customer. Given the confusion and opacity surrounding the deduction of Kshs. 6,368,577.57/= and the demand for Kshs. 120,097,258.43/=, it is imperative that the 1st Respondent be directed to render a comprehensive statement of all accounts maintained in the Appellant's name. MRANG’A HCCA E036 OF 2024 -JUDGMENT 28

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56. As regards the prayer for costs, I note that the Appellant has substantially succeeded in this appeal. The general rule is that costs follow the event. I therefore award the costs of this appeal and in the lower court to the Appellant. CONCLUSION AND ORDERS 57. In conclusion, I summarise my findings as follows: I. The learned trial magistrate did evaluate the evidence on record, but erred in failing to give adequate consideration to the issue of the deduction of Kshs. 6,368,577.57/= from the Appellant's account; II. The 1st Respondent has not satisfactorily justified the deduction of Kshs. 6,368,577.57/= from the Appellant's account, and the learned trial magistrate erred in dismissing this issue as being irrelevant to the loan obligations; III. The repossession and intended sale of Motor Vehicle Registration Number KDB 934J was not lawful in the circumstances, having been tainted by the 1st Respondent's failure to act in good faith and its conflation of unrelated claims; and IV. The Appellant is entitled to the consequential orders set out below. 58. In the result, I make the following orders: I. The appeal is allowed; MRANG’A HCCA E036 OF 2024 -JUDGMENT 29

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II. The judgment of the lower court delivered on 8th May 2024 in Murang'a CMCC No. E040 of 2022 is set aside in its entirety; III. An order is hereby issued directing the 1st and 2nd Respondents to forthwith release Motor Vehicle Registration Number KDB 934J, Mercedes Benz Actros, to the Appellant; IV. An order is hereby issued directing the 1st Respondent to render to the Appellant, within thirty (30) days of the date hereof, a true, proper, and accurate statement of all accounts maintained in the Appellant's name, including a detailed 6,368,577.57/= and breakdown of the deduction of Kshs. the for the demand of Kshs. basis 120,097,258.43/=; V. The Appellant is awarded the costs of this appeal and in the lower court; and VI. The release of the motor vehicle is without prejudice to the 1st Respondent's right to pursue any outstanding loan amounts through lawful means, provided that the 1st Respondent first renders a proper statement of account as directed in paragraph (iv) above. 59. Right of Appeal 30 days explained. DATED, SIGNED AND DELIVERED AT KAKAMEGA ONLINE THIS 24 TH DAY OF JULY, 2026. S.N MBUNGI MRANG’A HCCA E036 OF 2024 -JUDGMENT 30

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JUDGE In the presence of:CA: Angog’a/Velma Ms Nguli for the 1st Respondent present online. Ms Munira for the Applicant present online. MS MUNIRA: I request for 30 days stay. COURT: 30 days stay of execution granted . Copy of the Judgment shall be uploaded in the CTS. MRANG’A HCCA E036 OF 2024 -JUDGMENT 31

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